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The framing effect of tax–transfer systems

Published online by Cambridge University Press:  01 January 2025

Tai-Sen He Open the ORCID record for Tai-Sen He [Opens in a new window]
Tai-Sen He*
Affiliation:
Economics Programme, School of Social Sciences, Nanyang Technological University, 48 Nanyang Avenue, Singapore 639818, Singapore
*
e-mail: ts.he@ntu.edu.sg
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Abstract

The present study investigates the framing effect of tax–transfer systems on work effort decisions. We devised two theoretically equivalent treatments—the redistributive tax treatment and the redistributive transfer treatment—and studied subjects’ work effort choices in a novel public goods experiment. We found that subjects chose higher effort levels when redistribution took place via transfers than via taxes. Interestingly, the treatment effect was more pronounced among those with lower cognitive abilities and those who judged the tax–transfer system to be unfair. The results have the potential to offer insight on the debate about the extent to which taxes or transfers should be actively used for redistribution.

Keywords

Framing effectTax–transfer systemWork effortPublic goods experiment

JEL classification

H21: Efficiency • Optimal Taxation H31: Household C91: Laboratory, Individual Behavior
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 6 , Issue 2: Special Issue: Statistical Issues for Experimental Economists , December 2020 , pp. 213 - 225
Copyright
Copyright © Economic Science Association 2020

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Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s40881-020-00095-0) contains supplementary material, which is available to authorized users.

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