On the Effects of Transparency and Reciprocity on Labor Supply in the 
Redistribution Systems

Chugunova, Marina; Nicklisch, Andreas; Schnapp, Kai-Uwe

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On the Effects of Transparency and Reciprocity on Labor Supply in the Redistribution Systems

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Chugunova, Marina
MPI for Innovation and Competition, Max Planck Society;

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https://epub.sub.uni-hamburg.de/epub/volltexte/2020/100489/pdf/2017_19.pdf
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Citation

Chugunova, M., Nicklisch, A., & Schnapp, K.-U. (2017). On the Effects of Transparency and Reciprocity on Labor Supply in the Redistribution Systems. Working Paper / DFG-Research Group 2104, Nr. 2017-19.

Cite as: https://hdl.handle.net/21.11116/0000-0002-6A6C-F

Abstract

Although taxation distorts work incentives both for taxpayers and transfer recipients, its net eﬀect on labor provision is shown to be less severe than predicted by the theory. It is likely that the reciprocity between taxpayers and transfer recipients plays an important role in
mitigating the negative consequences of redistribution and maintaining a high level of eﬀort. To check it we run a series of real-eﬀort experiments exploring the production eﬀects of taxation in the environment with unilateral monitoring: Taxpayers can continuously monitor the eﬀort of the transfer recipient, which is designed to trigger reciprocity.
Surprisingly, we ﬁnd that monitoring decreases the total labor provision: recipients produce signiﬁcantly less under monitoring, while the
production of the taxpayers remains unchanged.