Essays in Public Finance and Development Economics

Abstract

This dissertation comprises three chapters. The first chapter investigates whether consumers can help governments improve firm compliance with the Value Added Tax. It exploits quasi-experimental variation from a government program from Sao Paulo, Brazil that created monetary rewards for consumers to ask for receipts. To assess how incentives to consumers can be effective despite potential collusion opportunities, I construct datasets for 1 million firms, 40 million consumers, and 2.7 billion receipts. I estimate that revenue reported in retail increased by at least 22% over four years. The estimated compliance effect is stronger for sectors with a high volume of transactions and small receipt values, consistent with a model in which there are fixed costs to negotiate collusive deals to avoid issuing receipts. Furthermore, the effect has an inverted-U shape with respect to firm size. This result is consistent with a model of higher baseline compliance among larger firms, and in which shifts in audit probability from consumer monitoring increase in firm size. I find no effects on exit rates or formal employment decisions.