Data and Code for: Employment Structure and the Rise of the Modern Tax System

Principal Investigator(s): View help for Principal Investigator(s) Anders Jensen, Harvard Kennedy School

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ReadMe.pdf	application/pdf	518.6 KB	12/22/2021 06:58:AM

Project Description

Summary:

Abstract This paper shows how the modern tax system characterized by high collection and redistributive capacities arises over development. I construct a new micro-database of households surveys which cover 100 countries at different income levels today and long-run time-series in the US (1870-2010) and Mexico (1960-2010). Using these data, I establish three new stylized facts: 1) the share of employees increases over the income distribution within country, and increases gradually further down the income distribution as a country develops; 2) the income tax exemption threshold moves down the income distribution as a country develops, tracking employee growth; 3) throughout development, the exemption threshold is located such that the employee-share on the tax base remains constant and high at 85-95 percent. I provide evidence to support the interpretation that a high employee share on the tax base is a necessary condition for effective taxation, due to the existence of third-party agents and information trails on employees that improve enforcement and lower administrative and compliance costs. In this setting, the rise in third-party information covered income through increases in employee-share drives expansions of the income tax base over development.

Scope of Project

Subject Terms: state capacity; employment structure; personal income taxation

JEL Classification:
      H11 Structure, Scope, and Performance of Government
      H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
      O11 Macroeconomic Analyses of Economic Development

Geographic Coverage: Albania, Argentina, Australia, Austria, Bangladesh, Belgium, Belize, Bolivia, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon, Canada, Chile, China, Colombia, Costa Rica, Cote d'Ivoire, Czech Republic, Dem Rep of Congo, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Ethiopia, Finland, France, Georgia, Germany, Ghana, Greece, Guatemala, Honduras, Hungary, Iceland, India, Indonesia, Iraq, Ireland, Israel, Italy, Jamaica ,Japan, Jordan, Kenya, Kosovo, Liberia, Lithuania, Luxembourg, Malawi, Mali, Mexico, Mongolia, Morocco, Mozambique, Namibia, Netherlands, Nicaragua, Niger, Nigeria, Norway, Pakistan, Palestine, Panama, Paraguay, Peru, Poland, Puerto Rico, Romania, Russia, Rwanda, Serbia, Sierra Leone, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Taiwan, Tajikistan, Tanzania, Timor Leste, Tunisia, Turkey, Uganda, United Kingdom, United States, Venezuela, Zambia, all US states

Universe: The analysis is at the level of the income decile in a particular country or US state and a particular year

Data Type(s): aggregate data; observational data; survey data

Methodology

Response Rate: Differs across 115 individual surveys

Sampling: Differs across 115 individual surveys

Data Source: Differs across 115 individual surveys; kindly refer to 'Data Sources' Excel document provided in replication package

Scales: Differs across 115 individual surveys

Weights: Weights are used to make surveys nationally representative; exact specification of weights differ across individual surveys

Unit(s) of Observation: Analysis is conducted at the [country/US state]-[year]-[income decile]

Geographic Unit: Country or individual State in the United States

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Published Versions

V1 [2021-12-22]

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