Working Papers

• Behavioral Responses to Tax Systems: Evidence from Costa Rica's Corporate Tax Reform (with Jonathan Garita) Draft here

Heinz König Award 2025, 3rd prize, by the ZEW – Leibniz Centre for European Economic Research

Abstract: We study firms’ responses to Costa Rica’s 2019 CIT reform, which replaced a notched schedule with a kinked one, reducing distortions in the system at the cost of simplicity. Using 2016–2023 administrative returns in a difference-in-differences design that exploits rich variation in marginal and average rates, we find: (i) signs of tax manipulation, such as bunching and profit-margin discontinuities at the first (now eliminated) revenue threshold, declined promptly after the reform; (ii) responses were asymmetric, with reactions to tax increases weaker than those to tax cuts, likely due to the removal of growth barriers; (iii) firms behaved like profit maximisers: their profits and other intensive-margin variables responded to marginal but not average tax rates, in contrast with evidence that individuals, when confronted with relatively complex non-linear schedules, conflate the two rates and deviate from optimising behaviour. Overall, clear communication of complex reforms from policy makers can improve efficiency without leading increased to compliance errors.

• Low-Earning Workers and Social Security: Evidence from Costa Rica’s Contributions Reform (with Laura Abramovsky and Jonathan Garita).  

Abstract:  High social security contribution costs are widely seen as a key barrier to registration, especially for low-earning workers in developing economies. In Costa Rica, the structure of the social security system creates particularly high costs for the registration of employees at the lower end of the earnings distribution and their employers, due to the application of a minimum contribution floor. In 2023, a reform aimed to reduce these costs by lowering this contribution floor, reducing registration costs for both employers and employees, rolled out gradually by age. Using rich administrative and survey data and exploiting the phased rollout, this paper evaluates the effects of the reform on registration and other labour market outcomes six moths after its implementation. We find no significant impacts on registration or on reported earnings to the social security administration. However, when examining constructed measures of net and gross earnings, we observe higher take-home pay for employees and lower total labour costs for employers. This suggests that the cost savings were shared in line with the statutory changes. Our short term findings imply that reducing social security contributions costs alone may not be enough to boost registration, at least in the short term, and point to the need for complementary policies to improve incentives and reduce barriers to registration.

Work in Progress

• Real Impacts of the Global Minimum Tax (with Felix Hugger and Tom Zawisza)

• Indicators of Misreporting by Importers at Customs: Trends, Drivers, and Recommendations for Tanzania.  

• Informality and Taxation: Evidence from a VAT Tax Base Expansion.

Publications

• Climate change perceptions and adaptive responses of small-scale farmers in two Guatemalan landscapes. Agronomía Centroamericana, 30 (2) (with Bárbara Viguera, Francisco Alpízar, Celian Harvey, Ruth Martínez-Rodríguez and Milagro Saborío-Rodríguez).

Policy Work

• Desarrollo de una propuesta metodológica y de una hoja de ruta para la medición de los recursos destinados a la niñez y adolescencia en Costa Rica: principales resultados del proyecto, UCR and UNICEF, 2020 (with Juan Robalino and Luis Oviedo) Document here.

• Impacto económico del impuesto al plástico, UCR and UNDP, 2019 (with Juan Robalino, Rudolf Lucke, and Luis Oviedo) Document here.

• Perspectivas de la energía eólica en Costa Rica: estado, retos y oportunidades, UCR, 2017 (with Pablo Sauma) Document here.