Working Paper: NBER ID: w21586
Authors: Casey B. Mulligan
Abstract: This paper treats taxation in kind (IKT) as an example of price regulation, emphasizing IKT-avoidance behavior, and its interactions with the other costs of price controls. This emphasis fundamentally changes efficiency conclusions, and adds new ones. IKTs do not in fact randomly sample suppliers. Large-scale IKTs, and not small-scale ones, may have especially large average efficiency costs. Ransoms or “commutation fees” are an IKT policy option, but are only efficiency enhancing in specific situations: more heterogeneity among suppliers, and avoidance technologies that result in avoidance behaviors that are poor signals of a supplier’s opportunity cost. Avoidance behaviors are one reason why the social costs of wars and other public projects involving IKTs may have been underestimated.
Keywords: In-Kind Taxes; Price Regulation; Avoidance Behavior; Comparative Advantage
JEL Codes: H56; K2; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IKT (O30) | inefficiencies due to avoidance behaviors (D91) |
| avoidance behaviors (D91) | comparative advantage distortion (F12) |
| avoidance behaviors (D91) | social costs related to public projects (H43) |
| IKT (O30) | average efficiency costs due to avoidance behaviors (D61) |
| avoidance behaviors (D91) | underestimation of social costs (H43) |
| IKT (O30) | misallocation of resources (D61) |
| avoidance behaviors (D91) | complexity in efficiency of IKT (C69) |
| comparative advantage distortions (F12) | efficiency enhancement (D61) |