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Show Your Hand: The Impacts of
Fair Pricing Requirements in Procurement Contracting
Journal of Accounting Research (2024)
Received the 2023 Best Dissertation Award from the Naveen Jindal School of Management at The University of Texas at Dallas.
Committee: Ashiq Ali (Chair), Ningzhong Li, Suresh Radhakrishnan, Ricardo Perez-Truglia, Gil Sadka
Abstract: This paper studies a provision in federal procurement regulation, known as the Truth in Negotiations Act (TINA), which stipulates how contracting officials can ensure price reasonableness. Following TINA, for contracts above a certain size threshold, contracting officials cannot rely solely on their judgment and must either require that suppliers provide accounting data supporting their proposed prices or expect multiple competing bids. Using a regression discontinuity design, I find that compared to below-threshold contracts, above-threshold contracts experience greater competition (i.e., more bids), improved performance (i.e., less frequent re-negotiations and cost overruns), and reduced reliance on cost-plus type contracts. These findings are consistent with the procurement system enhancing competition and monitoring for above-threshold contracts.
Select Presentations:
U.S. Department of Defense - Acquisition Innovation Research Center (video)
Columbia Business School
McGill University
University of Maryland
Rutgers University
Baruch College
University of Hong Kong
National University of Singapore
Hawaii Accounting Conference
The University of Texas at Dallas
Hong Kong University of Science and Technology
2021 AAA Deloitte Doctoral Consortium
Snapshot from the study: The TINA threshold increased from $750,000 to $2,000,000 in 2018. Blue circles show contracts before the change, and red dots after. The rate the data is required jumps sharply at each threshold only while it is in force. I find each threshold also drives more competition and less reliance on cost-plus contracts.
Paying Your Fair Share:
Perceived Fairness and Tax Compliance
With Ricardo Perez-Truglia & Alejandro Zentner
Journal of Accounting & Economics (Conditionally Accepted)
Abstract: We provide unique causal evidence on the significance of fairness considerations for tax compliance: households demonstrate greater willingness to pay taxes when they perceive that other households are also contributing their fair share. We conducted an information-provision field experiment in the context of U.S. property taxes where taxpayers can file a property tax appeal to legally reduce their property taxes. Our information-provision experiment introduces exogenous variation in a homeowner's perception of the average tax rate paid by other households. We measure the effects of the information shock on the homeowner's decision to file a tax appeal, measured via administrative records. When homeowners learn that the average tax rate is higher (lower) than they believed, that increases (decreases) their probability of filing tax appeals. We discuss implications for the design of tax policies and for the study of tax morale.
Select Presentations:
University of Chicago Behavioral Seminar (Nathan)
2024 Rutgers Accounting Research Conference (Nathan)
Stanford GSB Political Economy Workshop (Perez-Truglia)
ZEW Public Finance Conference (Zentner)
Yale Public & Labor Workshop (Perez-Truglia)
Snapshots from the study:
Above: In a survey experiment, most households thought they paid the average property tax rate, even though that is rarely true. When given accurate information, they adjusted their beliefs sharply.
Below: Using evidence from both a field experiment and a quasi-experiment, we estimate that for every additional dollar contributed by the average household, a homeowner is willing to pay about 43 cents more themselves.
Where Do My Tax Dollars Go?
Tax Morale Effects of Government Spending
With Matías Giaccobasso, Ricardo Perez-Truglia, & Alejandro Zentner
Forthcoming at American Economic Journal: Applied Economics
Abstract: Do perceptions about how the government spends tax dollars affect the willingness to pay taxes? We designed a field experiment to test this hypothesis in a natural, high-stakes context and via revealed preferences. We measure perceptions about the share of property tax revenues that fund public schools and the share of property taxes that are redistributed to disadvantaged districts. We find that even though information on where tax dollars go is publicly available and easily accessible, taxpayers still have significant misperceptions. We use an information-provision experiment to induce exogenous shocks to these perceptions. Using administrative data on tax appeals, we measure the causal effect of perceived government spending on the willingness to pay taxes. We find that some perceptions about government spending have a significant effect on the probability of filing a tax appeal and in a manner that is consistent with the classical theory of benefit-based taxation. We discuss implications for researchers and policy makers.
Select Presentations:
Hawaii Accounting Research Conference (Nathan)
2023 American Economic Association (Zentner)
University of Michigan (Perez-Truglia)
University of Chicago UCEMA ESA (Perez-Truglia)
2022 NBER Public Economics Program (Perez-Truglia)
International Institute of Public Finance (IIPF) (Giaccobasso)
Snapshot from the study: When we informed homeowners what share of their property taxes funds local schools, appeals fell by about 4.8 percentage points among households with children and rose by a similar amount among those without children. This statistically significant gap provides revealed-preference evidence of reciprocal motivation in tax payments.
My Taxes Are Too Darn High,
Why Do Households Protest Their Taxes?
With Ricardo Perez-Truglia & Alejandro Zentner
American Economic Journal: Economic Policy (2025)
Abstract: In the United States and many other countries, taxpayers can file a protest to legally reduce their property taxes. While tax protests can provide a unique opportunity to study the (un)willingness to pay taxes, they have received little attention from researchers. To fill that gap, we study what motivates households to protest their property taxes. Using a field experiment and a quasi-experiment, we show that both expected savings and filing frictions play significant roles. We estimate the magnitude of filing frictions using a money metric. We also discuss how low-cost interventions targeted at disadvantaged groups can mitigate existing economic and racial disparities in the system of tax appeals.
Select Presentations:
University of Chicago Behavioral Seminar (Nathan)
2021 AAA Annual Meeting (Nathan)
American Enterprise Institute (Perez-Truglia)
Stanford GSB Political Economy Workshop (Perez-Truglia)
Louis-André Gérard-Varet, U. of Barcelona Workshop (Zentner)
2020 NBER Public Economics Program (Perez-Truglia)
Snapshot from the study: In many states, property taxes are based on assessed value, which households can challenge through protests. For “homestead” households, taxable value cannot increase by more than 10% per year. Because taxes are based on this capped value, reductions in assessed value only matter if they are large enough to bring the assessment below the cap. The figure shows a sharp kink at the cap: households are less likely to protest the further their assessed value is above it.
Is the Partisan Divide Real? Polarization in Preferences for Redistribution
With Ricardo Perez-Truglia & Alejandro Zentner
American Economic Review Papers & Proceedings (2022)
Abstract: Republicans and Democrats are believed to be worlds apart from each other in their preferences for the role of the government, provision of public goods, and redistribution (Ahler, 2014). However, is the partisan divide real? In this paper, we provide some evidence from a context where the revealed differences in preferences for taxation and public goods provision are actually small and show that our revealed-preference evidence is consistent with some survey questions.
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