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Field
Trial Title
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Before
Fiscal policy constraints and firm expectations
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After
How do firms form preferences on tax policy?
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Trial Status
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Before
in_development
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After
completed
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Abstract
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Before
In the first few months of 2020 the COVID-19 outbreak developed to an unprecedented pandemic. Governments were forced to implement drastic measures like physical distancing and travel bans to contain the disease. It became quickly clear that this situation has led to a major global economic downturn and as such not only a threat to lives but also to the means of living for many: In particular providers of personal services and owners of small businesses seem affected, though the extent of the disruptive economic impact of COVID-19 is not yet entirely clear. The main objectives of this project are to learn i) how effective government support for firms of different sizes and in different industries is, ii) which policies look most promising and are most urgently required for a quick recovery of the economy from the firms perspectives, and iii) to assess the longer-term prospects of firm behavior in domains like firm survival, investments, or labor demand. We evaluate strategies of firms to cope with the crisis and expectations about government interventions with focus on tax policy.
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After
We study attitudes of firm-decision makers towards taxes using unique large-scale survey experiments representative for Germany. Starting from the hypothesis that businesses desire to lower taxes, we test how attitudes towards a 130 billion Euro fiscal stimulus and desired tax rates change, when subjects are confronted with two treatments highlighting social responsibility, fiscal responsibility, compared to a control group. We find that highlighting fiscal responsibility increases opposition against the state intervention and that the desire to reduce taxes diminishes but find no such effect when highlighting social responsibility. Firm-decision makers want to reduce taxes their firm has to pay stronger compared to taxes their firm does not have to pay. Managers are more willing to pay higher taxes, when agreeing with the fiscal stimulus. The harder the firm was hit by the Covid-19 crisis, the stronger the desire to lower taxes.
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Trial End Date
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Before
August 21, 2020
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After
October 31, 2020
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JEL Code(s)
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Before
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After
H21, H24, H25, H12, H32, H60, D6
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Field
Last Published
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Before
July 08, 2020 05:13 PM
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After
February 16, 2021 06:22 AM
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Field
Study Withdrawn
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Before
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After
No
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Intervention Completion Date
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Before
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After
October 31, 2020
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Field
Data Collection Complete
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Before
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After
Yes
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Final Sample Size: Number of Clusters (Unit of Randomization)
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Before
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After
12,168
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Field
Was attrition correlated with treatment status?
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Before
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After
No
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Field
Final Sample Size: Total Number of Observations
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Before
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After
12,168
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Field
Final Sample Size (or Number of Clusters) by Treatment Arms
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Before
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After
3,036 Fiscal Responsibility Treatment, 3,041Social Responsibility Treatment, 3,046 Control Group, 3,045 extra Treatment Fiscal Responsibility (No question on opinion about fiscal stimulus)
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Data Collection Completion Date
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Before
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After
October 31, 2020
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Intervention (Public)
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Before
We implement a survey with a set of questions in the context of the COVID-19 crisis.
The survey includes two information experiments with four randomized treatment arms each.
Fiscal constraints experiment:
i) Control group: no information provided
ii) Fiscal constraint I: information about the cost of government intervention highlighting past examples of tax increases after economic crises and aim of German politicians to repay debts until 2030.
iii) Fiscal constraint II: same as Fiscal constraint I but with question on how justified government intervention is.
iv) Need for intervention: information about the cost of government intervention highlighting the deterioration of the economic situation of businesses.
All treatment information in this experiment are presented as text.
Uncertainty experiment:
i) Control group: no information provided
ii) Optimistic outlook: information about an optimistic scenario published by the German Council of Economic Experts
iii) Pessimistic outlook: information about a pessimistic scenario published by the German Council of Economic Experts
iv) Uncertain outlook: information about both the optimistic and the pessimistic scenarios published by the German Council of Economic Experts
All treatment information in this experiment are presented as text and figures.
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After
We randomly assign firms to three treatments in our survey with the objective to induce variation in the two outcome variables attitudes towards the fiscal stimulus package and desired tax rates. The different treatments with regard to fiscal stimulus package are described in more detail.
The first group of firms receives an treatment that we label Fiscal Responsibility (FISCAL). This treatment includes a screen stating that the 130 billion Euro fiscal stimulus could make tax increase or spending cuts necessary. Moreover, we highlight that many countries in financial crisis 2008/9 increased taxes to make this issue more salient to the respondents. We also cite representatives of one of the government parties in Germany, the CDU, who announced to repay debts by 2030, to make the possibility of tax increases or spending cuts more credible. The FISCAL treatment therefore mainly stresses the fiscal consequences of the state intervention and makes firm decision-makers more aware of the long-term implication of the stimulus package, i.e. that distributed fiscal aid for the firms must be paid back via higher taxes.
The second group of firms has also been made aware of the 130 billion Euro fiscal stimulus, however, we emphasize that many firms are in distress through no fault of their own, citing the example of the hotel and restaurant industry losing 75.8% of revenues and that the fiscal stimulus package is designed to help them. We refer to this treatment as Social Responsibility (SOCIAL) treatment. In contrast to the FISCAL treatment, the SOCIAL treatment alludes to fairness considerations and highlight that the stimulus package was primarily intended to help firms in need.
Finally, we assigned firms to a control group (CONTROL) that did not receive any text. We asked for the attitude towards the fiscal stimulus on the same screen, showing the treatment texts for the FISCAL and SOCIAL group. For the CONTROL group, we only asked for the attitude towards the fiscal stimulus package without further text. For all 3 different groups (FISCAL, SOCIAL, CONTROL), we asked for the desired tax rates after the treatments were given and the attitude question was asked on a separate screen.
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Intervention End Date
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Before
August 21, 2020
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After
October 31, 2020
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Primary Outcomes (End Points)
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Before
i) expected changes in tax rates in the short run (next 12 months)
ii) expected changes in tax rates in the medium run (next 12-24 months)
iii) optimal tax rate from firm's perspective for government support of firms
iv) investment plans in the short run (next 12 month)
v) investment plans in the medium run (next 12-24 months)
vi) hiring plans in the short run (next 12 months)
vii) hiring plans in the medium run (next 12-24 months)
viii) expected survival of firms in the same industry
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After
Attitude Towards the Fiscal Stimulus and Desired Tax Rates
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Experimental Design (Public)
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Before
See also "Interventions" described above.
The first information treatment targets directly expectations about future tax policy. We randomly assign 1/4 of the participants to receive information on the costs of the government intevention highlighting examples where tax increases followed economic crises and that German politicians aim to repay all debts by 2030, another 1/4 get the same information with an question on how justified this government intervention is. The next 1/4 of the participants receive information on the costs of the government support package, the deterioration of the economic situation of businesses and a question on how justified this government intervention is. The remainder 1/4 serves as control group.
Investment and hiring plans as well as expected firm survival depend not only on expected tax policy but also on uncertainty. We randomly assign 1/4 of the participants to receive information on an optimistic scenario for recovery taken from the German council of economic advisors, another 1/4 to a pessimistic scenario, and 1/4 to both the optimistic and the pessimistic scenarios. The remainder 1/4 serves as control group.
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After
See also "Interventions" described above.
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Planned Number of Observations
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Before
We approach approximately 600,000 firms and invite them to participate in our survey. We expect a response rate between 0.5 an 5%. For example, a response rate of 1% would imply that we have 6,000 independent firm-level observations.
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After
We approach approximately 300,000 firms and invite them to participate in our survey. We expect a response rate between 0.5 an 5%.
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Additional Keyword(s)
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Before
Firm behavior, government support, crisis management, large-scale survey, firm heterogeneity, uncertainty
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After
Desired Tax Rates, Fiscal Stimulus, Firm-Decision Makers, Survey Experiments
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