Hannelore Weck-Hannemann

Tax Rates, Tax Administration and Income Tax Evasion in Switzerland

This paper contains an empirical analysis of income tax noncompliance in Switzerland, based on the standard model of tax evasion. Noncompliance is found to be positively related to the marginal tax burden and negatively to the probability of audit, though the latter impact is only weak. There is no evidence of a significant deterrent effect of the penalty tax. The extended model reveals that noncompliance is positively related to inflation. Finally, noncompliance is significantly lower when citizens/taxpayers have direct control over government budgets, whereas the opposite holds when there is no such control.

Charity hazard : A real hazard to natural disaster insurance?

Abstract After the flooding in 2002 European governments provided billions of Euros of financial assistance to their citizens. Although there is no doubt that solidarity and some sort of assistance are reasonable, the question arises why these damages were not sufficiently insured. One explanation why individuals reject to obtain insurance cover against natural hazards is that they anticipate governmental and private aid. This problem became to be known as “charity hazard”. The present paper gives an economic analysis of the institutional arrangements on the market for natural disaster insurances focusing on imperfections caused by governmental financial relief. It provides a theoretical explanation why charity hazard is a problem on the market for natural disaster insurances, in the way that it acts as an obstacle for the proper diffusion and therefore the establishment of natural hazard insurances. This paper provides a review of the scientific discussion on charity hazard, provides a theoretical analysis and points out the existing empirical problems regarding this issue.

Pricing road use: politico-economic and fairness considerations

Abstract Road pricing measures are rarely adopted in practice. In this review, we ask why citizens are not more supportive of road pricing. We identify two difficulties. First, the general public is often unwilling to embrace the price system as an allocation mechanism for scarce resources. Second, for politico-economic reasons, any latent support for road pricing schemes rarely translates into actual policy-making. Based on our analysis, we outline components of a road pricing policy that might receive greater electoral support.

Taxation and the Veil of Ignorance – A Real Effort Experiment on the Laffer Curve

In this paper we address the role of theveil of ignorance on work incentives andtax rates in a two-person real effortexperiment. We find that effort levelsdecrease with a rise in tax rates. Taxrevenues peak at intermediate tax rates of50% to 65%, supporting the existence of aLaffer curve in taxation. Tax authoritiesdo not exploit their power to tax in full,which is compatible both with revenuemaximizing but also fair behavior. Behindthe veil of ignorance, subjects care morefor efficiency and restrict the power totax more than in case their position(taxpayer or tax authority) is fixed inadvance.

An Experimental Test of the Public Goods Crowing Out Hypothesis when Taxation Is Endogenous

Andreoni (1993) has shown in an experimental study that crowding out is incomplete when an involuntary lump-sum tax is levied exogenously on individuals to finance the provision of a public good. In this paper, we (i) replicate Andreonis experimental conditions, and (ii) introduce treatments where subjects vote on a tax, which is (iii) either below or above the Nash equilibrium. We find almost complete crowding out with exogenous taxation. Voting behavior with respect to the tax in the endogenous treatment has high predictive power for voluntary contributions, but only when voting on a tax that is below the Nash equilibrium of the game.

Do People Care about Democracy? An Experiment Exploring the Value of Voting Rights

In almost all democratic national elections an individual vote cannot change the election outcome. The fact that many individuals nevertheless participate voluntarily in such elections suggests that people do care about democracy as such. This experiment investigates the value of democratic voting rights by providing participants the chance to sell them. More specifically, an incentive compatible mechanism is used to elicit the willingness-to-accept value of the voting right in the election of the German Bundestag on 16 October 1994. A postexperimental questionnaire makes it possible to assess the relative importance of answers to the frequently raised question: Why do people vote?

ARE INCENTIVE INSTRUMENTS AS GOOD AS ECONOMISTS BELIEVE? SOME NEW CONSIDERATIONS

The Theory of Environmental Economics strongly suggests that the use of incentive instruments, which exploit the relative price effect, constitutes the most efficient and desirable policy. A recent survey on environmental policy (Hahn 1989, p. 95) notes that “the two tools which have received widespread support from the economics community (are) marketable permits and emission charges.” Environmental incentive instruments count among the most successful applications of economic theory (Faulhaber and Baumol, 1988; Cropper and Oates 1992). During the last few years, emission charges and even tradeable effluent licenses have moved from being an academic proposal to being part of the policy programme of many parties across the whole political spectrum. Nevertheless, incentive instruments are little used all over the world (Hahn, 1989); and an OECD study (1989) also sees little prospect that they will be used on an extensive scale in the future.

On the effects of asymmetric and endogenous taxation in experimental public goods games

Abstract In our experimental public-goods game, subjects face exogenously or endogenously determined asymmetric minimum contributions. Endogeneity does not affect overall contributions. If asymmetric contribution levels are approved of endogenously, the disadvantaged subjects contribute significantly less than in case of exogenous determination.

Sustainable Natural Hazard Management in Alpine Environments

This edited book, which comprises 13 chapters, provides an overview of the projects conducted at alpS—Centre for Natural Hazard and Risk Management during the period 2002– 2008. Based in Innsbruck, Austria, the research center was established in response to an increased frequency of natural disasters towards the end of the 1990s, with a vision of conducting ‘‘...unified natural hazard research’’ (p v). The latter has involved bringing together scientists, social scientists, and engineers from a range of organizations, both public and private, in a single research center. The importance of the research center (and, by implication, the book) is outlined by the authors of the first chapter, who argue that the occurrence and impacts of natural hazards in mountain environments are likely to increase due to a combination of climate change and increasing population pressure. This prediction is not based on any detailed analysis of historical data. Rather, the emphasis is firmly on likely future trends, and, in terms of the role that climate change may play, the projections contained in the fourth assessment report of the Intergovernmental Panel on Climate Change are referred to extensively. For society to be better prepared for the increasing frequency and impact of such disasters, the authors argue that it is necessary ‘‘...to proceed from the reaction to and protection against hazards to pro-active integrative risk management strategies as a contribution to a sustainable safety...’’ (p 30). This sounds like a good approach, but what exactly does it mean? Essentially, the authors consider the application of principles and techniques from economics and finance to be integral to any approach to natural hazard management. This seems like a reasonable proposition: natural hazard management is associated with costs and benefits, and a multidisciplinary approach is surely the best way of deploying scarce resources. However, what this means in practice is not entirely clear; the reader might assume that this integrative approach is exemplified in the remaining chapters of the book, although this does not turn out to be the case. A quick glance through the contents pages reveals a remarkably diverse range of chapter topics, a product of the multidisciplinary nature of the research center. For example, there is a chapter on the risk perceptions of tourists, another chapter on laser scanning for topographic data acquisition, and one on the investigation and monitoring of deep-seated landslides. Some topics receive greater emphasis; there are 3 chapters on economics and finance and 4 on hydrological hazards. Because the chapter contents reflect what was funded, inevitably there are gaps in coverage; snowand ice-related hazards do not obviously feature, and the treatment of slope failures in general is quite limited. Also, despite its prominent place in the title, the term ‘‘sustainable’’ does not appear in any of the chapter headings. The diversity of topics means that it is not possible to provide a chapterby-chapter review, although it is appropriate to make some general observations. The most important thing to mention is that there is plenty to appeal to those interested in natural hazard management, including the fact that the book provides an overview of some of the German-language literature published in this area. Many of the chapters are built around case studies, providing examples of applied research in Alpine environments (with a geographic emphasis on the Innsbruck region). However, much of the material is quite narrow and specialized and will not be readily accessible to those without an appropriate background; this is advanced reading and probably targeted at postgraduates and researchers. The integrative approach advocated by the authors of the first chapter is not much in evidence within individual chapters (Chapter 10, ‘‘Risk Management,’’ being a possible exception), although it is arguably present in the book as a whole. This leaves the reader to reflect on what, if anything, this integrative approach might mean in practice to workers in the field. Finally, the reviewer assumes that the authors of the book use the term ‘‘sustainable’’ primarily in an economic sense; it does not appear to be explicitly addressed in any other way. As for design and production, the book is generously illustrated, with extensive use of color throughout. Unfortunately, a small number of diagrams are barely legible due to being reproduced at such a small size. This is not a major issue, but it is annoying where it does occur, given the price of the book. Other annoyances include something of a hit-andmiss approach to proofreading; typographical, grammatical, and style errors are distracting in a couple of chapters (especially the first chapter, which is a real shame). And it is also a pity that there is no index. So, who should buy this book? It would make a useful addition to any university library. The specialized and varied nature of its chapters, not to mention the price, means that it is less likely to find a home on the bookshelves of individual researchers, even though its title would suggest otherwise.

Why Is Economic Theory Ignored in Environmental Policy Practice

In the past there was hardly any use of economic theory and instruments in environmental policy, mainly command and control measures dominated. More recently, ecological taxes became increasingly popular and have been proposed but not implemented with an ecological effect. Thus, the situation has not changed, and we must ask for the reasons of this situation and the prevailing nonacceptance of these instruments. The purpose of this paper is to give some answers on these questions using the Public Choice approach. The proposition of an ecological tax reform and road pricing measures are taken to discuss how actual environmental policy deviates from economic prescriptions.