Theoretically Robust But Empirically Invalid? An Experimental Investigation into Tax Equivalence
AbstractThe idea that the final distribution of the tax burden (economic incidence) does not depend on the initial distribution of tax liabilities (statutory incidence) is referred to as the Liability Side Equivalence principle. This paper tests this principle in the laboratory and finds that subjects who actually have to pay the tax carry a higher tax burden. It is argued that this violation of Liability Side Equivalence is due to the fact that a change in the distribution of tax liabilities induces a shift in behaviorally relevant social norms. This shift, in turn, affects the impact of the tax. Our results explain some striking empirical observations and have important theoretical and practical implications.
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Bibliographic InfoPaper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number vie9704.
Date of creation: May 1997
Date of revision:
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Web page: http://www.univie.ac.at/vwl
Other versions of this item:
- Rudolf Kerschbamer & Georg Kirchsteiger, 2000. "Theoretically robust but empirically invalid? An experimental investigation into tax equivalence," Economic Theory, Springer, vol. 16(3), pages 719-734.
- Georg Kirchsteiger & Rudolf Kerschbamer, 2000. "Theoretically robust but empirically invalid: an experimental investigation into tax equivalence," ULB Institutional Repository 2013/5903, ULB -- Universite Libre de Bruxelles.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
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