Equity and efficiency when needs differ
Kristoffer Berg, Morten Haavarstein, Pablo G. Piacquadio
Published in
Journal of Public Economics (August 2026)
Abstract
There is no consensus on how to measure social welfare and inequality when households have different needs. As we show, a dilemma emerges between holding households responsible for their needs or compensating them. This dilemma is of first-order importance for social welfare, but generally plays a minor role in the measurement of inequality. To address this impasse, we introduce partial compensation. Our axiomatic characterizations reveal novel families of welfare criteria and, with the extension to multidimensional commodity spaces, provide ready-to-use criteria for the analysis of redistributive policies.
Substitution and income effects of labor income taxation
Michael Graber, Morten Håvarstein, Magne Mogstad, Gaute Torsvik, Ola L.Vestad
Abstract
The elasticity of taxable income (ETI) parameter is a key quantity in empirical analysis of tax policy and labor supply. We examine when a commonly applied class of ETI estimands can be used to learn about individuals’ ETI parameters and their (un)compensated elasticities of labor supply. We begin by providing necessary and sufficient conditions for these estimands to be given a causal interpretation as a positively weighted average of heterogeneous ETI parameters. We then apply these results to empirically analyze a reform of the Norwegian tax system that reduced the marginal tax rates on middle and high incomes. The estimated ETI parameters increase steadily with income, meaning high-income individuals are more responsive to tax changes than middle-income individuals. Next, we show how (un)compensated elasticities of labor supply can be bounded directly from the ETI estimands, or point identified by combining these estimands with estimates of earnings responses to lottery winnings. The results suggest an (un)compensated elasticity of 0.1 (0.0) for middle-income individuals. The (un)compensated elasticity estimates increase steadily with income to around 0.45 (0.3) for high-income individuals. These findings imply a substantial excess burden of taxation, and that reducing top-income tax rates would increase tax revenue. Our findings are also informative about how the intertemporal elasticity of substitution and the Frisch elasticity vary across the income distribution.
Improving housing valuation for taxation: the Norwegian case
Thor Olav Thodesen, Erlend E. Bø & Odd E. Nygård
Published in
Springer Nature Link (November 2025)
Abstract
Several forms of taxation incorporate the market value of housing into their tax base, making accurate and up-to-date property valuations important. However, due to limitations in available information, assessing residential property values poses a significant challenge for tax authorities. This paper presents and examines the simple, inexpensive and transparent methodology currently used in Norway to assign market values to individual dwellings for wealth taxation purposes. The method uses predictions generated through hedonic regression models based on housing transaction data. We present two versions of the method: the current model, introduced in 2010, and a refined version that substantially improves prediction accuracy, through the use of data from smaller geographical units. This latter enhancement incorporates machine learning techniques for geographical clustering.
Measuring long-run wealth inequality: Empirical results for Norway 1912-2019
Rolf Aaberge, Jørgen Modalsli & Edda Solbakken
Published in
Statistics Norway (SSB), Discussion Papers (2025)
Abstract
This paper introduces a framework for estimating long-run series of measures of overall inequality and top wealth shares when data consist of a combination of historical tabulations and modern administrative registers of taxable wealth. The proposed framework is applicable when historical wealth tabulations as a minimum provide information on bracket boundaries and the proportion of tax units for each of the wealth brackets. The framework has been used to produce evidence on wealth inequality in Norway from 1912 to 2019. The empirical results show that wealth inequality as measured by the Gini coefficient was very high at the beginning of the twentieth century, fell during the post-war period and has increased substantially since the 1980s. The rise in wealth inequality over the recent four decades is driven by a rise in the wealth share of the top 1 per cent, while equalization among the bottom 99 per cent accounted for 70 percent of the reduction in wealth inequality from the early 1950s to the late 1960s.
Who Pays a Tourist Tax? A Study of Tax Incidence and Market Responses in Norway’s Accommodation Sector
Axel Melhus Ericson
Published in
DUO Research Archive (master's thesis)
Abstract
This thesis examines the tax incidence of a proposed tourist tax in Norway, using VAT on accommodation as a proxy. Using a regression discontinuity design on data for the consumer price of accommodation and hotel revenue from room rentals, I estimate the tax incidence using changes in the VAT rate for accommodation in 2006, 2016, and 2018. The results suggest that while the tax burden of the VAT increase in 2006 was primarily borne by consumers, the VAT increases in 2016 and 2018 were partly borne by producers as well. The thesis discusses the evolution of tax incidence from 2006 to 2018, identifying the growth of short-term rental platforms such as Airbnb as a potentially contributing factor. In light of these results, I discuss the implications for the tax incidence of a potential tourist tax while recognizing the limitations of using VAT as a proxy for a tax that has not yet been implemented. This thesis contributes to the literature on tax incidence and tourism taxation, and offers insights for future policy design in countries considering similar taxes.
Effektene ved å avvikle en ekstra arbeidsgiveravgift på høytlønnede
Lars August Askheim
Published in
DUO Research Archive (master's thesis)
Abstract
Oppgaven undersøker hvordan avviklingen av den ekstra arbeidsgiveravgiften på lønninger over 16G (kakseskatten) i 2006 påvirket lønnsutviklingen til høytlønnede. Ved hjelp av arbeidstaker-arbeidsgiverregistre koblet med lønns- og trekkoppgaveregister (ATMLTO) for 1995-2010 konstrueres det et paneldata bestående av kakser med stabil lønn 16G-20G 2001-2005 og kontrollgruppe med andre høytlønnede 12G-16G. Lønnseffekten identifiseres med Difference-in-Differences (DiD) og event study. Det teoretiske og empiriske grunnlaget tilsier at ved avvikling av kakseskatten burde det enten føre til relativ lønnsvekst hos kakser eller ingen forskjell i lønnsvekst. Derimot resultatene finner at lønnsveksten til kakser er gjennomsnittlig 2.1 prosent lavere enn kontrollgruppen. Jeg tolker resultatet som et utslag av modell feilspesifisering. Årsaken til dette er usikkert, men kan handle om at skjer andre sjokk samtidig som påvirker gruppene forskjellig eller noe underliggende ved modellen. Studien viser svakheter ved å bruke DiD-design og ser behovet for videre studie av kakseskatten om hvor skattegevinsten endte opp.
Lavinntekt blant barn i Norge: En mikrosimuleringsstudie som dekomponerer utviklingen fra 2005 til 2022
Kjartan Kaatee Gjerde
Published in
DUO Research Archive (master's thesis)
Abstract
Andelen barn i lavinntektshusholdninger har økt betydelig i Norge siden 2005. Denne oppgaven undersøker hvordan endringer i skatte- og overføringssystemet har påvirket denne utviklingen. Ved hjelp av mikrosimuleringsmodellen LOTTE-Skatt dekomponeres denne endringen, og effekten av politiske regelendringer isoleres fra endringer i underliggende data. For det første viser analysen at endringer i skatter og overføringer samlet sett har bidratt til en økning i andelen barn i lavinntektshusholdninger. For det andre finner analysen at en langvarig nominell videreføring av barnetrygden har vært den viktigste politiske forklaringen på økningen, mens øvrige skatteendringer hadde mindre betydning. Til slutt konkluderer oppgaven med at øvrige endringer i befolkningen også har vært viktige forklaringen for utviklingen i barnefattigdom.
Income Equality in The Nordic Countries: Myths, Facts, and Lessons
Magne Mogstad, Kjell G. Salvanes & Gaute Torsvik
Published in
NHH Dept. of Economics Discussion Paper, No. 03/2025 (forthcoming in Journal of Economic Literature)
Abstract
Policymakers, public commentators, and researchers often cite the Nordic countries as examples of a social and economic model that successfully combines low income inequality with prosperity and growth. This article aims to critically assess this claim by integrating theoretical perspectives and empirical evidence to illustrate how the Nordic model functions and why these countries experience low inequality. Our analysis suggests that income equality in the Nordics is primarily driven by a significant compression of hourly wages, reducing the returns to labor market skills and education. This appears to be achieved through a wage bargaining system characterized by strong coordination both within and across industries. This finding contrasts with other commonly cited explanations for Nordic income equality, such as redistribution through the taxtransfer system, public spending on goods that complement employment, and public policies aimed at equalizing skills and human capital distribution. We consider the potential lessons for other economies that seek to reduce income equality. We conclude by discussing several underexplored or unresolved questions and issues.
Self-Insurance and Selection into Disability Insurance
Maxwell Kellogg
Published in
The University of Chiacago Press Journals, Journal of Political Economy Microeconomics (February 2025)
Abstract
The U.S. Disability Insurance (DI) system has a lengthy application process and strict work limitations. This paper presents evidence that these features cause negative selection into DI benefit receipt by screening out poorly self-insured individuals, other things equal. Taking the evidence to a rich life cycle model, this paper finds that expansionary DI reforms do not generate ex-ante welfare value in excess of their fiscal costs, as benefits can accrue to negatively-selected individuals with low marginal utility of consumption and strong self-insurance capacity. However, combining an asset test with expansions to the DI system can improve targeting and welfare
The Intergenerational Transmission of Welfare Dependency
Monique De Haan & Ragnhild C. Schreiner
Published in
The Economic Journal, 1–32 (2025)
Abstract
Exploiting rich administrative data from Norway, we estimate non-parametric bounds around the average causal effect of parental welfare participation on children’s welfare participation for children that grew up in welfare-dependent families. We find upper bounds well below the intergenerational association and substantially below existing local average treatment effect estimates in the literature. Our results show that a substantial portion of the observed intergenerational correlation in welfare dependency is due to selection, and that there is important heterogeneity in the intergenerational effects both between participants (and their children) within a welfare program, as well as across different welfare programs.
Is Support for Authoritarian Rule Contagious? Evidence from Field and Survey Experiments
Sirianne Dahlum, Torbjørn Hanson, Åshild Johnsen, Andreas Kotsadam & Alexander Wuttke
Published in
American Journal of Political Science, November 2024 (forthcoming)
Abstract
The increasing popularity of strongman rule in democratic societies underscores the need to explore how authoritarian regime preferences might spread socially. We assess the role of social influence on support for leaders with authoritarian inclinations through pre-registered field and survey experiments in the Norwegian Armed Forces. The field experiment randomly assigned soldiers to different rooms during boot camp, so soldiers lived among peers with varying levels of openness to authoritarian rule. We found that many individuals adjusted their privately reported support for authoritarian rule to align more closely with their peers. Further survey-experimental evidence among soldiers and the general Norwegian population confirms that learning about others’ level of support for authoritarian rule changes both perceptions about the preferences of others’ and own attitudes. Our results suggest that support for authoritarian rule can have a social basis and could potentially spread through social contagion in established democracies.
Strikes and Machines: Investment decisions in the inter-war period
Andreas Kotsadam, Magnus Bergli Rasmussen, Kalle Moene, Anders Kjelsrud, & Haakon Gjerløw
Published in
The Journal of Economic History, June 2024 (forthcoming)
Abstract
To what extent do strike threats lead investors to adopt capital-intensive methods to deter strikes or labor-intensive approaches to enhance flexibility during work stoppages? We introduce a theoretical model that demonstrates how threats of industrial action influence capital investments through relative factor prices and the power dynamics between workers and employers. Using newly digitized data from 3,141 industrial conflicts in Norway during the interwar period, our findings indicate that strikes generally drive firms toward less capital-intensive technologies. This trend is particularly pronounced in conflicts resolved at the branch or national level, where strike threats may appear more exogenous to firms.
Wealth Taxation and Charitable Giving
Marius A. K. Ring & Thor O. Thoresen
Published in
The Review of Economics and Statistics, 1–45 (2025)
Abstract
We use third-party reported data and two quasi-experiments from Norway to study how tax incentives affect charitable giving. First, using a shock to wealth tax exposure, we estimate the semi-elasticity of giving with respect to the after-tax return on wealth. Inconsistent with the notion that households accelerate giving to reduce future taxes, we find that a 1% wealth tax reduces giving by 26%. Second, using bunching at an income-tax deduction threshold, we estimate a moderate own-price elasticity of giving of -0.44. This elasticity exhibits little heterogeneity with respect to income and wealth but is considerably larger for religious giving.
Revealing inequality aversion from tax policy and the role of non-discrimination
Kristoffer Berg
Published in
Economica, 1-24 (2025)
Abstract
Governments have increasing access to individual information, but they exploit little of it when setting taxes. This paper shows how to reveal inequality aversion from observed tax policy choices of such governments. First, I map governments' priorities into concerns for vertical and horizontal equity. While vertical equity underlies inequality aversion, horizontal equity introduces a restriction against tax discrimination. This restriction affects the measurement of inequality aversion. Second, I apply the model to a hypothetical gender tax using Norwegian tax return data. The main result is that inequality aversion is overestimated when horizontal equity is ignored.
Wealth Taxation and Household Saving: Evidence from Assessment Discontinuities in Norway
Marius A. K. Ring
Published in
The Review of Economic Studies, October 2024 (forthcoming)
Abstract
Neither theory nor existing empirical evidence support the notion that wealth taxation reduces saving. Theoretically, the effect is ambiguous due to opposing income and substitution effects. Empirically, the effect may be masked by misreporting responses. Using geographic discontinuities in the Norwegian annual net-wealth tax and third-party-reported data on savings, I find that wealth taxation causes households to save more. Each additional NOK of wealth tax increases annual net financial saving by 3.76, implying that households increase saving enough to offset both current and future wealth taxes. This positive effect on saving is primarily financed by increases in labour earnings. These responses are the combination of small negative effects of increasing the marginal tax rates and larger positive effects of increasing average rates. My findings imply that income effects may dominate substitution effects in household responses to rate-of-return shocks, which has implications for both optimal taxation and macroeconomic modelling.
Perspektivmeldingen som veiviser for nasjonalbudsjettene?
Knut Moum & Ragnhild Schreiner
Published in
Samfunnsøkonomen, 5. utgave, 2024
Abstract
Den 9. august i år la finansminister Trygve Slagsvold Vedum frem Perspektivmeldingen 2024 den sjette i rekken av slike meldinger. Formålet med årets melding er å belyse hvordan den norske velferdsmodellen, og et samfunn med små forskjeller, kan vernes og videreutvikles i møte med ulike utfordringer. Meldingen retter særlig oppmerksomheten mot aldringen av befolkningen, men er også opptatt av at produktivitetsveksten er lavere enn før, at aktiviteten i petroleumsnæringen vil avta over tid og at klimautfordringen og økende globale spenninger vil kreve mer ressurser. Som flere av forgjengerne, peker årets melding på økt sysselsetting og en mer effektiv offentlig sektor som svar på hovedutfordringen, kombinert med en «ansvarlig økonomisk» politikk.
Ein skattekommentar til statsbudsjettet
Gaute Torsvik
Published in
Samfunnsøkonomen, 5. utgave, 2024
Abstract
Som leiar av skattesenteret ved økonomisk institutt er det naturleg å fokusera på skatteforslaga i statsbudsjettet. Først flyg eg høgt og ser på dei store linjene, balansen mellom skatteinntekter og offentlege utgifter. Deretter landar eg og vurderer konkrete skatteforslag. Der er det lite nytt, mest flikking.
The Legal Incidence of Ad Valorem Taxes Matters
Fred Schroyen & Wilfired Pauwels
Published in
Journal of Economics (2024)
Abstract
It is well known that, for a specific tax, its economic incidence does not depend on which side of the market has the legal obligation to pay the tax. In this paper, we show that, for an ad valorem tax, this legal incidence does matter for the economic incidence. In particular, when a government imposes an ad valorem tax rate on the sale of a commodity, the resulting reduction in the market equilibrium level of sales will be larger when sellers are obliged to pay the tax than when buyers are obliged to pay the tax.
Dissecting Idiosyncratic Earnings Risk
Elin Halvorsen, Hans A. Holter, Serdar Ozkan and Kjetil Storesletten
Published in
Journal of European Economic Association (2023)
Abstract
This paper examines whether nonlinear and non-Gaussian features of earnings dynamics are caused by hours or hourly wages. Our findings from the Norwegian administrative and survey data are as follows: (i) Nonlinear mean reversion in earnings is driven by the dynamics of hours worked rather than wages since wage dynamics are close to linear, while hours dynamics are nonlinear—negative changes to hours are transitory, while positive changes are persistent. (ii) Large earnings changes are driven equally by hours and wages, whereas small changes are associated mainly with wage shocks. (iii) Both wages and hours contribute to negative skewness and high kurtosis for earnings changes, although hour-wage interactions are quantitatively more important. (iv) When considering household earnings and disposable household income, the deviations from normality are mitigated relative to individual labor earnings: changes in disposable household income are approximately symmetric and less leptokurtic.
Long-run evolution of income inequality in the Nordic countries
Rolf Aaberge and Erik Bengtsson
Published in
Scandinavian Economic History Review (2023)
Abstract
This paper surveys Nordic historic studies on the distribution of income to highlight similarities and differences between Denmark, Finland, Norway, and Sweden in the evolution of income concentration and income inequality over more than 140 years. Our descriptive analysis allows for a decomposition where we identify the contribution of the income share of the richest 1 per cent and the distribution of income among the other 99 per cent to overall inequality as measured by the Gini coefficient. The results show that the evolution of income concentration and inequality can be characterised by episodes rather than by secular cycles, which means that the evolution can neither be summarised by Kuznets’ inverse U nor by a U. The evidence on the role played by the share of the top 1 per cent for overall income inequality shows to be mixed and to vary across time and countries.
How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income
Magne Mogstad, Mikhail Golosov, Michael Graber and David Novogorodsky
Published in
Quarterly Journal of Economics (2023)
Abstract
We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event-study design. We first examine individual and household earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra dollar of unearned income in a given period reduces household labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Next, we examine margins of adjustment other than earnings and, in the course of doing so, address a number of important economic questions about how additional wealth or unearned income affects retirement decisions and labor market dynamics, family formation and dissolution, entrepreneurship and self-employment, and geographic mobility and neighborhood choice. Lastly, we carefully compare our findings to those reported in existing lottery studies. This comparison reveals that existing U.S. studies substantially underestimate wealth and income effects because they use measures that understate earnings responses and overstate wealth changes associated with lottery wins.
Controlling for fixed effects in studies of income underreporting
Thor Olav Thoresen and Odd E. Nygård
Published in
European Journal of Law and Economics (2023)
Abstract
The expenditure method of Pissarides and Weber (J Public Econ 39(1):17–32, 1989) shows how one backs out measure of income underreporting by the self-employed by using food consumption as trace of true income. In this paper we make a case for using panel data and fixed effects estimation in such analysis, instead of OLS esti- mation. The main argument is that fixed effects estimation addresses the problem of omitted variable bias in the identification. We demonstrate the use of panel data and fixed effects estimation by using large-scale administrative register data on charita- ble donations, exploiting that the data can be turned into a panel dataset. The results suggest that the estimation technique matters—fixed effects estimates are smaller than OLS estimates.
Alternatives to Paying Child Benefit to the Rich: Means-Testing or Higher Tax?
Ray Rees, Thor Olav Thoresen and Trine E. Vattø
Published in
Australian Economic Review, Volume 56, 2023, pp. 328-354.
Abstract
There appears to be a general movement away from universal child benefits and towards means-testing. In the present article we argue that instead of suppressing the labour supply of middle-income parents by withdrawing the transfer as a function of income, one should consider the alternative of financing a generous universal child benefit by increasing taxation of income. The implications of means-testing compared with a tax-financed universal alternative are discussed analytically in a piecewise linear schedule and by combining information from behavioural and non-behavioural micro-simulation models. Our results provide support for making child benefit universal instead of means-tested.
Do Audits Improve Future Tax Compliance in the Absence of Penalties? Evidence from Random Audits in Norway
Thor O. Thoresen, Shafik Hebous, Zhiyang Jia and Arnstein Øvrum
Published in
Journal of Economic Behavior & Organization, Volume 207, 2023, pp. 305-326.
Abstract
The Norwegian Tax Administration conducted multi-year random audits on a specific item in the personal income tax return. We exploit this exceptional randomized setup to estimate the effects of tax audits on future compliance explicitly distinguishing between dynamic responses of compliant and noncompliant audited taxpayers. A priori, the literature has suggested two competing effects: a post-audit deterrence effect, whereby audits prompt taxpayers to comply in subsequent years, or a “bomb-crater” effect, whereby audits lower taxpayers’ subjective perception of the probability of future evasion being detected and hence weaken compliance. Our results show improved future compliance for six post-audit years by those found noncompliant in the audits, despite the absence of penalties. Although the findings are consistent with a deterrence effect, mainly stemming from being caught in wrongdoing rather than being penalized, we argue that there could also be a “learning effect” involved. An important implication of our study is that better information for taxpayers critically should complement tax audits.
Evaluating Compliance Gains of Expanding Tax Enforcement
Gaute Torsvik, Knut Løyland, Oddbjørn Raaum and Arnstein Øvrum
Published in
Forthcoming in Economica
Abstract
This paper demonstrates how tax administrations can evaluate future compliance gains from risk‐based tax enforcement that audits all taxpayers above a risk threshold. Expanding tax enforcement in this setting means reducing the audit threshold. The compliance gains from such an expansion consist of a mechanical audit correction effect and a behavioural effect that reflects changes in self‐reporting in the subsequent years. We estimate this behavioural effect in a regression discontinuity analysis with the risk score as the forcing variable. We find that taxpayers at the margin had a significant reduction in self‐reported deductions in the next years' tax filing. The behavioural effect over a three‐year post‐audit period is estimated to be of a magnitude similar to that of the direct adjustment of the audit. This compliance effect does not change when we include the reporting of the spouse. We find that the risk score threshold that maximizes net public revenue from the audits is considerably below current practice.
A European equivalence scale for public in‑kind transfers
Rolf Aaberge, Audun Langørgen and Petter Lindgren
Published in
Journal of Economic Inequality (2023)
Abstract
This paper introduces a theory-based equivalence scale for public in-kind transfers, which justifies comparison of distributions of extended income (cash income plus the value of public services) between European countries. We demonstrate the usefulness of the proposed equivalence scale in an empirical analysis of the effects of public health care, long-term care, education and childcare expenditure on estimates of income inequality and poverty for 24 European countries. The empirical results show significant effects of public in-kind transfers on the level of income inequality and poverty for all countries. Over the period 2006–2018, inequality and poverty estimates display rather different trends across European countries.
Arbeidsfradrag og skatt på formue – kommentarer til Torvik-utvalget
Thor Olav Thoresen
Published in
Samfunnsøkonomen, 2. utgave, 2023
Abstract
Behovet for skatteinntekter og arbeidskraft i tiden som kommer taler for at vi innretter skattesys- temet slik at disinsentivene til markedsarbeid begrenses. Jeg tror imidlertid ikke at Torvik-utvalgets hovedgrep for å oppnå dette – arbeidsfradraget – vil ha noe særlig effekt på sysselsettingen. I stedet foreslås det her å se på kvinners arbeidstilbud mer generelt. Jeg er enig med utvalget i at det er grunnlag for å fortsette beskatningen av formue, men mens utvalget foreslår å gjeninnføre skatt på arv, argumenterer jeg for at det godt kan skje innenfor en årlig skatt på nettoformue. Torvik-utvalgets rapport kan danne grunnlaget for et «historisk kompromiss» når det gjelder formuesbeskatningen, dvs. at partiene på Stortinget går sammen om å etablere et langsiktig og forutsigbart system for årlig beskatning av formue.
Facts and Fantasies about Wage Setting and Collective Bargaining
Magne Mogstad, Manudeep Bhuller, Karl Ove Moene and Ola L. Vestad
Published in
Journal of Economic Perspectives, Volume 36 No. 4, 2022, pp. 29-52.
Abstract
In this article, we document and discuss salient features of collective bargaining systems in the OECD countries, with the goal of debunking some misconceptions and myths and revitalizing the general interest in wage setting and collective bargaining. We hope that such an interest may help close the gap between how economists tend to model wage settings and how wages are actually set. Canonical models of competitive labor markets, monopsony, and search and matching all assume a decentralized wage setting where individual firms and workers determine wages. In most advanced economies, however, it is common that firms or employer associations bargain with unions over wages, producing collective bargaining systems. We show that the characteristics of these systems vary in important ways across advanced economies, with regards to both the scope and the structure of collective bargaining.