Fairness-adjusted Laffer curve: strategy versus direct method

DOI10.3390/G9030056MaRDI QIDQ1630480zbMATH OpenOpenAlexWikidataFDO

Authors Hamza Umer

Publication date 10 December 2018

Published in Games (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.3390/g9030056

zbMATH Keywords

behavioraldirect methoddisutilityfairnessLaffer curvestrategy method

Mathematics Subject Classification ID

Experimental studies (91A90) Macroeconomic theory (monetary models, models of taxation) (91B64)

Review text

Summary: This paper reports results from controlled laboratory experiments on the Laffer curve and explores the productivity differences under the strategy method and the direct method. The data collected in Pakistan show no significant productivity difference across the two methods. The paper argues that the Laffer curve is not the result of a simple leisure-income tradeoff; the disutility of work and perceived unfairness of the tax imposed also influence the work decisions. A behavioral model that incorporates these factors induces a ``fairness adjusted Laffer curve with the negative relationship between tax rate and tax revenue showing up after 54\% tax rate.

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Cites work

• Probabilistic choice and procedurally bounded rationality

Cited in

(4)

• Market power and the Laffer curve
• Identifying Laffer bounds: a sufficient-statistics approach with an application to Germany
• Tax farming redux: experimental evidence on performance pay for tax collectors
• The relationship between tax rates and tax revenues in eurozone member countries -- exploring the Laffer curve

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Uses Software

• Z-Tree

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