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The information method - theory and application

Author

Listed:
  • Engström, Per

    () (Nationalekonomiska institutionen)

  • Hesselius, Patrik

    () (IFAU - Institute for Labour Market Policy Evaluation)

Abstract

When estimating the extent of e.g. excess use of public benefits one traditionally uses direct monitoring. Such direct estimates are afflicted with an intrinsic negative bias since you only count what you find. This paper presents and assesses an alternative intuitive, yet relatively unexplored, approach that may reduce the bias by making use of the individual's own response to information of increased monitoring. Through an extensive randomized social experiment we apply the method to one particular Swedish public benefit: Parental Benefit for Temporary Childcare. In our view the application was successful: the results are interpretable and we are able to surface more hidden excess use through the information method. As a rough estimate we find that the information based estimate of excess use is 40 percent higher than the corresponding estimate based on ordinary random monitoring (22.5 percent compared to 16 percent). The method is potentially applicable to a large number of related fields, such as e.g. tax evasion and insurance fraud.

Suggested Citation

  • Engström, Per & Hesselius, Patrik, 2007. "The information method - theory and application," Working Paper Series 2007:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  • Handle: RePEc:hhs:ifauwp:2007_017
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    File URL: http://www.ifau.se/upload/pdf/se/2007/wp07-17.pdf
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    References listed on IDEAS

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    1. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, August.
    2. Engström, Per & Hesselius, Patrik & Persson, Malin, 2007. "Excess use of Temporary Parental Benefit," Working Paper Series 2007:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    3. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-141, March.
    4. Lindsay M. Tedds, 2004. "Nonparametric expenditure-based estimation of income under-reporting and the underground economy," Department of Economics Working Papers 2004-17, McMaster University.
    5. Hesselius, Patrik & Johansson, Per & Larsson, Laura, 2005. "Monitoring sickness insurance claimants: evidence from a social experiment," Working Paper Series 2005:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    6. Coleman, Stephen, 1996. "The Minnesota income tax compliance experiment: State tax results," MPRA Paper 4827, University Library of Munich, Germany.
    7. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, July.
    8. Slemrod, Joel & Blumenthal, Marsha & Christian, Charles, 2001. "Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota," Journal of Public Economics, Elsevier, pages 455-483.
    9. Engström, Per & Holmlund, Bertil, 2006. "Tax Evasion and Self-Employment in a High-Tax Country: Evidence from Sweden," Working Paper Series 2006:12, Uppsala University, Department of Economics.
    10. Per Engstrom & Bertil Holmlund, 2009. "Tax evasion and self-employment in a high-tax country: evidence from Sweden," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2419-2430.
    11. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, pages 17-32.
    12. Slemrod, Joel & Blumenthal, Marsha & Christian, Charles, 2001. "Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota," Journal of Public Economics, Elsevier, pages 455-483.
    13. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association, vol. 58(4), pages 643-663, December.
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    Cited by:

    1. Engström, Per & Hesselius, Patrik & Persson, Malin, 2007. "Excess use of Temporary Parental Benefit," Working Paper Series 2007:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Dina Pomeranz, 2015. "No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax," American Economic Review, American Economic Association, pages 2539-2569.
    3. Dina Pomeranz, 2015. "No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax," American Economic Review, American Economic Association, pages 2539-2569.

    More about this item

    Keywords

    Monitoring; Social insurance; Randomized experiments;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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