GHOST-HOUSE BUSTERS: THE ELECTORAL RESPONSE TO A LARGE ANTI TAX EVASION PROGRAM ∗ Lorenzo Casaburi Ugo Troiano This Version: July 2015 Abstract The incentives of political agents to enforce tax collection are key determinants of the levels of compliance. We study the electoral response to the Ghost Buildings program, a nationwide anti tax evasion policy in Italy that used innovative monitoring technologies to target buildings hidden from tax authorities. The program induced monetary and non-monetary benefits for non-evaders and an increase in local government expendi- tures. A one standard deviation increase in town-level program intensity leads to a 4.8 percent increase in local incumbent reelection rates. In addition, these political returns are higher in areas with lower tax evasion tolerance and with higher efficiency of public good provision, implying complementarity among enforcement policies, the underlying tax culture, and the quality of the government. JEL codes: H26, H71, D72, E62, O17, O38 ∗ Lorenzo Casaburi,
[email protected]. Ugo Troiano,
[email protected]. We are indebted to the Agenzia del Territorio that provided the administrative data used in this paper. We thank the Editor (Elhanan Helpman), the Coeditor (Andrei Shleifer), and four anonymous referees for suggestions that improved the paper significantly. We also wish to thank Alberto Alesina, Joseph Altonji, Josh Angrist, Sam Asher, Robert Barro, Raj Chetty, David Cutler, Pascaline Dupas, Ed Glaeser, Jim Hines, Larry Katz, Michael Kremer, Asim Kwhaja, Jacob Leshno, Massimo Maoret, Sendhil Mullainathan, Aurelie Ouss, Manisha Padi, Rohini Pande, Torsten Persson, Dina Pomeranz, Adam Ray, Tristan Reed, Giovanni Reina, L´aszl´oS´andor,Monica Singhal, Joel Slemrod, Andrea Stella, Seth Stephens-Davidowitz, David Str¨omberg, Tavneet Suri, David Yanagizawa-Drott, and seminar audiences at Berkeley, Boston University, EEA Meetings, Harvard, MIT, NTA Meetings, RES Meetings, Stanford, and the University of Michigan.