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Information Frictions and Learning Dynamics: Evidence from Tax Avoidance in Ecuador

Albrecht Bohne () and Jan Sebastian Nimczik ()
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Albrecht Bohne: University of Mannheim
Jan Sebastian Nimczik: Humboldt University Berlin

No 11536, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We show how experience and dynamic learning processes reduce the obstacles to optimization imposed by information frictions when individuals newly enter the formal sector economy. Most importantly, we provide causal evidence on the exact mechanisms through which individuals learn about the functioning of government programs. To this aim, we exploit novel and rich administrative data on the universe of taxpayers in Ecuador and the introduction of generous tax deduction policies. Key to the identification of information transmission is exogenous worker mobility between firms. We find that the spread of information is driven by mobility of managers and tax experts.

Keywords: learning; tax avoidance; information frictions; taxation and development; bunching; behavioral responses to taxation (search for similar items in EconPapers)
JEL-codes: D83 H24 H26 H32 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2018-05
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