Naomi E. Feldman

Crime and Mental Well-Being

We provide empirical evidence of crimes impact on the mental well-being of both victims and nonvictims. We differentiate between the direct impact to victims and the indirect impact to society due to the fear of crime. The results show a decrease in mental well-being after violent crime victimization and that the violent crime rate has a negative impact on mental well-being of nonvictims. Property crime victimization and property crime rates show no such comparable impact. Finally, we estimate that society-wide impact of increasing the crime rate by one victim is about 80 times more than the direct impact on the victim.

Taxpayer Confusion: Evidence from the Child Tax Credit

We develop an empirical test for whether households understand or misperceive their marginal tax rate. Our identifying variation comes from the loss of the Child Tax Credit when a child turns 17. Using this age discontinuity, we find that despite this tax liability increase being lump-sum and predictable, households reduce their reported wage income upon discovering they have lost the credit. This finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate. This evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses. (JEL D12, D14, H24, H31)We develop a model of how taxpayers update beliefs over their tax rates when they encounter a non-salient tax liability change. We test the models hypotheses using the loss of the Child Tax Credit when a child turns 17. Because this tax liability change is lump-sum and predictable, there should be no reaction in labor income if taxpayers are fully informed. Using this age discontinuity, we find, however, that losing the credit reduces household labor income. This finding suggests that taxpayers misperceive the source of tax liability changes, leading to under- or over-reactions to changes in marginal tax rates.

The Impact of Tax Exclusive and Inclusive Prices on Demand

We test the equivalence of tax-inclusive and tax-exclusive prices through a series of experiments that differ only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more when faced with tax-exclusive prices. This treatment effect is robust to different price levels, to initial shopping-cart purchases and persists throughout most of the ten rounds. A goods-level analysis, intra-round revisions as well as results from a third tax-deduction treatment all cast doubt on salience as the source of our findings.

Mental Accounting Effects of Income Tax Shifting

This paper analyzes a 1992 decrease in U.S. federal income tax withholding that shifted the timing of income tax payments while leaving ultimate tax burdens unchanged. Consequently income typically received as a lump-sum refund on filing a tax return was shifted into the previous years monthly income. This paper considers the impact of the withholding change in the context of mental accounting and finds a decrease in the probability that households contributed to a tax-preferred retirement account. Additional robustness tests show that short-term saving did not simultaneously increase and that the main findings are not driven by liquidity constraints.

Skill Choice and Skill Complementarity in Eighteenth Century England

This paper analyzes the effects of technological change on skill acquisition during the British Industrial Revolution. Based on a unique set of data on apprenticeships between 1710 and 1772, we show that both the number of apprentices and their share in the cohort of the fifteen year-olds increased in response to inventions. The strongest response was in the highly skilled mechanical trades. These results suggest that technological change in this period was skill biased due to the expansion of the machinery sector they induced.

Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure

We examine the impact on air travelers of an enforcement action issued by the U.S. Department of Transportation (DOT) in 2012 requiring that domestic air carriers and online travel agents incorporate all mandatory taxes and fees in their advertised fares. Consistent with the literature on tax salience, we find quasi-experimental evidence that the more prominent display of tax-inclusive prices is associated with a reduction in tax incidence on consumers, and this effect varies non-monotonically with market concentration. Ticket revenues are commensurately reduced, while passenger demand and average per-passenger tax revenue between origin and destination airport-pairs likewise decline following the introduction of full-fare advertising.