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Using Divide and Conquer to Improve Tax Collection: Theory and Laboratory Evidence

Author

Listed:
  • Sylvain Chassang

    (Princeton University)

  • Lucia Del Carpio

    (INSEAD)

  • Samuel Kapon

    (Princeton University)

Abstract

We consider a government collecting taxes from a large number of tax-payers using limited enforcement capacity. Under random enforcement, limited capacity results in multiple equilibria: if most agents comply, limited enforcement is sufficient to dissuade individual misbehavior; if most agents do not comply, enforcement capacity is overstretched and fails to dissuade misbehavior. In settings without behavioral frictions, prioritized enforcement strategies can implement high collection as the unique rationalizable outcome. Motivated by a field implementation opportunity, we investigate both theoretically and experimentally the extent to which this insight extends to environments with incomplete information and bounded rationality.

Suggested Citation

  • Sylvain Chassang & Lucia Del Carpio & Samuel Kapon, 2022. "Using Divide and Conquer to Improve Tax Collection: Theory and Laboratory Evidence," Working Papers 299, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:299
    as

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    File URL: https://gceps.princeton.edu/wp-content/uploads/2022/06/299_Chassang_government_capacity_theory_22May.pdf
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    References listed on IDEAS

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    Cited by:

    1. Lucia Del Carpio & Samuel Kapon & Sylvain Chassang, 2022. "Using Divide-and-Conquer to Improve Tax Collection: Evidence from the Field," Working Papers 301, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Anne Brockmeyer & Francisco Garfias & Juan Carlos Suárez Serrato, 2024. "The Fiscal Contract up Close: Experimental Evidence from Mexico City," CESifo Working Paper Series 11270, CESifo.
    3. Tanner Regan & Priya Manwaring, 2023. "Public Disclosure and Tax Compliance: Evidence from Uganda," Working Papers 2023-04, The George Washington University, Institute for International Economic Policy.
    4. Manwaring, Priya & Regan, Tanner Weldon Dean, 2023. "Public disclosure and tax compliance: evidence from Uganda," LSE Research Online Documents on Economics 121298, London School of Economics and Political Science, LSE Library.
    5. Sylvain Chassang & Lucia Del Carpio & Samuel Kapon, 2020. "Making the Most of Limited Government Capacity: Theory and Experiment," Working Papers 2020-7, Princeton University. Economics Department..

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    More about this item

    Keywords

    tax collection; government capacity; divide and conquer;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other

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