Theoretically robust but empirically invalid? An experimental investigation into tax equivalence

Rudolf Kerschbamer and Georg Kirchsteiger

Economic Theory, 2000, vol. 16, issue 3, 719-734

Abstract: The idea that the final distribution of the tax burden (economic incidence) does not depend on the initial distribution of tax liabilities (statutory incidence) is referred to as the Liability Side Equivalence principle. This paper tests this principle in the laboratory and finds that subjects who actually have to pay the tax carry a higher tax burden. It is argued that this violation of Liability Side Equivalence is due to the fact that a change in the distribution of tax liabilities induces a shift in behaviorally relevant social norms. This shift, in turn, affects the impact of the tax. Our results explain some striking empirical observations and have important theoretical and practical implications.

Keywords: Tax equivalence; Tax incidence; Social norms. (search for similar items in EconPapers)
JEL-codes: C91 C92 H21 H22 H30 (search for similar items in EconPapers)
Date: 2000-08-11
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Citations: View citations in EconPapers (48)

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