Theoretically Robust But Empirically Invalid? An Experimental Investigation into Tax Equivalence

27 Pages Posted: 20 Mar 2000

See all articles by Rudolf Kerschbamer

Rudolf Kerschbamer

University of Innsbruck; Centre for Economic Policy Research (CEPR)

Georg Kirchsteiger

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

The 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.

JEL Classification: H21, H22, H30, C91, C92

Suggested Citation

Kerschbamer, Rudolf and Kirchsteiger, Georg, Theoretically Robust But Empirically Invalid? An Experimental Investigation into Tax Equivalence. Available at SSRN: https://ssrn.com/abstract=200209 or http://dx.doi.org/10.2139/ssrn.200209

Rudolf Kerschbamer (Contact Author)

University of Innsbruck ( email )

Universitaetsstrasse 15
Innsbruck, A - 6020
Austria
+43 512 507 7400 (Phone)
+43 512 507 2980 (Fax)

HOME PAGE: http://www.uibk.ac.at/c/c4/c409/staff/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Georg Kirchsteiger

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Av. F. D. Roosevelt 50
CP 114
Brussels, B-1050
Belgium

HOME PAGE: http://www.ecares.org/people/members/kirchsteiger/kirchsteiger/home.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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