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Behavioral Economics and Tax Policy

  • William Congdon
  • Jeffrey R. Kling
  • Sendhil Mullainathan

Behavioral economics is changing our understanding of how economic policy operates, including tax policy. In this paper, we consider some implications of behavioral economics for tax policy, such as how it changes our understanding of the welfare consequences of taxation, the relative desirability of using the tax system as a platform for policy implementation, and the role of taxes as an element of policy design. We do so by reviewing the logic of specific features of tax policy in light of recent findings in areas such as tax salience, program take-up, and fiscal stimulus.

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File URL: http://www.nber.org/papers/w15328.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15328.

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Date of creation: Sep 2009
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Publication status: published as National Tax Journal, 62:3 (September 2009), 375-386.
Handle: RePEc:nbr:nberwo:15328
Note: PE
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  1. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
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  11. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
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  14. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
  15. Shapiro, Matthew D & Slemrod, Joel, 1995. "Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding," American Economic Review, American Economic Association, vol. 85(1), pages 274-83, March.
  16. Chambers, Valrie & Spencer, Marilyn, 2008. "Does changing the timing of a yearly individual tax refund change the amount spent vs. saved?," Journal of Economic Psychology, Elsevier, vol. 29(6), pages 856-862, December.
  17. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
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