Superannuation co-contribution, jam choice, and taxation

The Henry tax review has posted an interesting paper on its website.

Behavioural economics and complex decision making: implications for the Australian tax and transfer system by Andrew Reeson and Simon Dunstall, CSIRO
This paper summarises the relevant literature (from behavioural economics and psychology) on how individuals make simple and complex decisions; considers how these findings can provide a basis for designing policies adapted to these human behaviours; and concludes by considering some implications of these findings for the tax and transfer system (such as the decision making consequences of removing the burden of complexity from individuals)

The paper is a very nice review of behavioural economics, and neatly grounds the case for simplification in the psychology/economics experiments that largely originated with Kahneman and Tversky. My only quibble is that the paper misses the latest wave of US research around behavioural public finance being done by Raj Chetty, Emmanuel Saez, etc (for a discussion, see this op-ed). That research actually has even more fundamental implications for much of what public economists do (eg. EMTRs might not matter if they’re not perceived, legal incidence might matter after all).

(HT: Rosanna Scutella)

This entry was posted in Behavioural Economics, Tax. Bookmark the permalink.