Incentive schemes affect performance and priorities of agents but, in reality, they can be complicated even for simple tasks. We analyze the effects of the salience of incentives in a team production setting where the principal has an interest in quantity and quality of output. We use data from...

We study management practices and performance of public sector organizations in Germany. For a representative sample of municipalities, we provide survey evidence for substantial heterogeneity in the use of structured management practices. This heterogeneity is not driven by differences across...

We characterize optimal incentive contracts in a moral hazard framework extended in two directions. First, after effort provision, the agent is free to leave and pursue some ex-post outside option. Second, the value of this outside option is increasing in effort, and hence endogenous. Optimal...

This paper is the first to provide evidence of efficient taxation of groups with heterogeneouslevels of ‘tax morale’. We set up an optimal income tax model where high tax morale impliesa high subjective cost of evading taxes. The model predicts that ‘nice guys finish last’: groupswith...

The Great Recession did not only affect European countries to a varying extent, its impact onnational labour markets and on specific socio-economic groups in those markets also variedgreatly. Institutional arrangements such as employment protection, unemployment insurancebenefits and minimum...

The success of the flat rate tax in Eastern Europe suggests that this concept could also be amodel for the welfare states of Western Europe. The present paper uses a simulation modelto analyse the effects of revenue neutral flat rate tax reforms on equity and efficiency for thecase of Germany...

Using a unique dataset of German members of parliament with information on total earnings including outside income, this paper analyzes the politicians' wage gap (PWG). After controlling for observable characteristics as well as accounting for selection into politics, we find a positive PWG...

Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor...

There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a...

The concept of equality of opportunity (EOp) goes back to Roemer (1993, 1998) who argues that a society shall guarantee its members equal access to advantage regardless of their circumstances, while holding them responsible for turning that access into actual advantage by the application of...