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Fairness-Adjusted Laffer Curve: Strategy versus Direct Method

Graduate School of Economics (GSE), Waseda University, Tokyo 169-8555, Japan
Games 2018, 9(3), 56; https://doi.org/10.3390/g9030056
Received: 21 June 2018 / Revised: 25 July 2018 / Accepted: 31 July 2018 / Published: 2 August 2018
This paper reports results from controlled laboratory experiments on the Laffer curve and explores the productivity differences under the strategy method and the direct method. The data collected in Pakistan show no significant productivity difference across the two methods. The paper argues that the Laffer curve is not the result of a simple leisure—income tradeoff; the disutility of work and perceived unfairness of the tax imposed also influence the work decisions. A behavioral model that incorporates these factors induces a “fairness adjusted” Laffer curve with the negative relationship between tax rate and tax revenue showing up after 54% tax rate. View Full-Text
Keywords: Laffer curve; direct method; strategy method; disutility; fairness; behavioral Laffer curve; direct method; strategy method; disutility; fairness; behavioral
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Umer, H. Fairness-Adjusted Laffer Curve: Strategy versus Direct Method. Games 2018, 9, 56.

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