Public policy for reducing tax evasion: implications of the Yule–Simpson paradox

Yuval Arbel, Chaim Fialkoff and Amichai Kerner

Applied Economics Letters, 2019, vol. 26, issue 13, 1092-1099

Abstract: The current study exhibits a new implication of the Yule–Simpson paradox with public policy repercussions. We construct Laffer curves of local property tax collection based on aggregated data and group division to residential land uses in Jerusalem. Results indicate that based on aggregated (dis-aggregated) data, the location of owner-occupiers and renters who pay a relatively high rate tariff will be on the upward-sloping (downward-sloping) part of the Laffer curve. Consequently, statistical test outcomes support Laffer’s controversial claim that for the few upper-brackets taxpayers, an efficient collection is associated with tax reduction rather than tax increase.

Date: 2019
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DOI: 10.1080/13504851.2018.1537471

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