The Effective Use of Limited Information: Do Bid Maximums Reduce Procurement Costs in Asymmetric Auctions

Agricultural and Resource Economics Review, 39/2 (April 2010) 288-304

17 Pages Posted: 21 Feb 2016

See all articles by Daniel Hellerstein

Daniel Hellerstein

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division

Nathaniel Alan Higgins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Date Written: April 19, 2010

Abstract

This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal income tax evasion in the U.S. Employing a refined version of Feige’s (1986; 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find that 18-23% of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the range of $390-$537 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results of sufficient accuracy and reliability to serve as effective policy guides.

Keywords: conservation auctions, Conservation Reserve Program, CRP, bid caps, experimental economics

JEL Classification: Q28, Q24, D44

Suggested Citation

Hellerstein, Daniel and Higgins, Nathaniel Alan, The Effective Use of Limited Information: Do Bid Maximums Reduce Procurement Costs in Asymmetric Auctions (April 19, 2010). Agricultural and Resource Economics Review, 39/2 (April 2010) 288-304 . Available at SSRN: https://ssrn.com/abstract=2735083

Daniel Hellerstein (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5613 (Phone)
202-694-5756 (Fax)

Nathaniel Alan Higgins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5602 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
155
PlumX Metrics