• Home
  • Research
    Academic Research Research by Topic
  • Policy
  • Tax Simulator
  • Teaching
  • CV
  • #DiscoverEconomics
  • Wealth Tax Commission
Income Inequality
Wealth Inequality
Tax Design
Tax Compliance
Migration
Ethnicity/Race
Education
Environment
Development
Econometrics


Income/Wealth Inequality

Income Inequality

Measuring and taxing top incomes and wealth
A. Advani and A. Summers (2022), CAGE Working Paper 580
Data for the charts.
In this paper we discuss first the measurement of financial inequalities, focusing on top income and wealth shares. We then consider the scope for policy reforms to tackle some of the issues raised.

Non-doms: basics and case for reform
A. Advani, D. Burgherr and A. Summers (2022)
This short note summarises some key facts about non-doms, and explains the case for reform to the current regime. It first explains briefly what it means to be a non-dom, the tax advantages this can bring, the costs associated with use of these tax benefits, and past reforms to the regime. It then provides some key statistics on non-doms in the UK. Finally, we explain why the regime is in need of reform.

Reforming the non-dom regime: revenue estimates
A. Advani, D. Burgherr and A. Summers (2022), CAGE Policy Briefing 38
Data for the charts.
Video summary.
Media coverage
Coverage in Guardian, Independent and Financial Times. Op-ed by us in New Statesman.
This CAGE Policy Briefing studies the offshore income and capital gains of the UK's ‘non-doms’ – individuals who are resident in the UK but who claim on their tax return that their permanent home (‘domicile’) is abroad. We use de-identified confidential data accessed via HMRC to analyse all individuals who have claimed non-dom status between 1997 and 2018. We show non-doms at least £10.9 billion in offshore income and gains. Most of these unreported income and gains (55%) belong to non-doms who arrived in the UK in the past five years. Looking at previous reforms that restricted access to the non-dom regime, we see these led to very little emigration. Those who did leave were paying hardly any tax. Consequently, abolishing the non-dom regime would raise at least £3.2 billion even after accounting for migration and other tax planning, and the loss of existing revenue from the remittance basis charge.

Immigration and the top 1 percent (ungated)
A. Advani, F. Koenig, L. Pessina and A. Summers (forthcoming), Review of Economics and Statistics
Data for the charts.
Explainer video and VoxEU column summarising some of the key points.
Media coverage
Coverage in Forbes, FT, and Guardian. Plus Op-ed in the Times.
Using administrative data on the universe of UK taxpayers, we study the contribution of migrants to the rise in UK top incomes. We show migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.01% as anywhere in the bottom 97%. These high incomes are predominantly from labour, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Almost all (90%) of the observed growth in the UK top 1% income share over the past 20 years has accrued to migrants.

Measuring top income shares in the UK
A. Advani, A. Summers, and H. Tarrant (forthcoming), Journal of the Royal Statistical Society: Series A [earlier version available as CAGE Working Paper 490
WID Technical Note and associated data series.
We compare two approaches to measuring UK top income shares—the share of income going to particular subgroups, such as the top 1%. We set out four criteria that an ideal top share series should satisfy: (i) comparability between numerator and denominator; (ii) comparability over time; (iii) international comparability; and (iv) practical sustainability. Our preferred approach meets three of these; by contrast the approach currently used to produce UK fiscal income series meets none of them. Changing to our preferred approach matters quantitatively: the share of income going to the top 1% is 2 percentage points higher, but rising more slowly, than under the alternative.

Missing incomes in the UK: Evidence and policy implications
A. Advani, T. Ooms, and A. Summers (2022), Journal of Social Policy
Policymakers tend to ‘treasure what is measured’ and overlook phenomena that are not. In an era of increased reliance on administrative data, existing policies also often determine what is measured in the first place. We analyse this two-way interaction between measurement and policy in the context of the investment incomes and capital gains that are missing from the UK’s official income statistics. We show that these ‘missing incomes’ change the picture of economic inequality over the past decade, revealing rising top income shares during the period of austerity. The underestimation of these forms of income in official statistics has diverted attention from tax policies that disproportionately benefit the wealthiest. We urge a renewed focus on how policy affects and is affected by measurement.

Importing inequality: Immigration and the top 1% (Blog)
A. Advani, F. Koenig, L. Pessina and A. Summers (2020), VoxEU
Media coverage
Coverage in Forbes, FT, and Guardian. Plus Op-ed in the Times.
Top incomes have grown rapidly in recent decades and this growth has sparked a debate about rising inequality in Western societies. This column combines data from UK tax records with new information on migrant status to show that that migrants are highly represented at the top of the UK’s income distribution. Indeed, migration can account for the majority of top-income growth in the past two decades and can help explain why the UK has experienced an outsized increase in top incomes.

How much tax do the rich really pay? New evidence from tax microdata
A. Advani and A. Summers (2020), CAGE Policy Briefing 27
Data for the charts.
LSE Press Release and a video from the launch event.
LSE Business Review Blogpost summarising key points.
Submissions to the OTS Capital Gains Tax review and Treasury Select Committee 'Tax After Covid' Inquiry.
Media coverage
Coverage in Financial Times, Independent, Times, Accountancy Daily, Credit Protection Association, Estates Gazette, London Economic, Mirage News, and Prime Resi. Later discussion in the FT, Guardian, and City AM, and a column in the Guardian.
This CAGE Policy Briefing summarises new research on the taxes paid by the UK’s richest individuals, using anonymised data collected from the personal tax returns of everyone who received over £100,000 in total remuneration (taxable income plus taxable capital gains). It shows how tax paid as a share of income or total remuneration varies across individuals. It shows effective tax rates are much lower than headline rates, regressive at high levels of income or remuneration, and vary by up to a factor of five across people with the same remuneration. An Alternative Minimum Tax of 35% could raise around £11bn, equivalent to 2p on the basic rate or 5p on both the higher and additional rates.

Capital Gains and UK Inequality: New evidence from tax microdata
A. Advani and A. Summers (2020), CAGE Policy Briefing 19
Data for the charts.
Resolution Foundation Press Release and a video plus slides from the launch event.
Advantage magazine article.
Media coverage
Coverage in Independent, Guardian, Mirror, Evening Standard, and Global Citizen. Plus Op-eds in the Times, Guardian, and Independent.
This CAGE Policy Briefing summarises new research on the impact of capital gains – which are excluded from existing income statistics – on measured inequality in the UK. It shows gains are highly concentrated, are persistent for a minority, and are rising. The richest have a larger share of total resources than previously thought, and it has been growing over time.

Who gains? The importance of accounting for capital gains
A. Corlett, A. Advani and A. Summers (2020), Resolution Foundation Report
Resolution Foundation Press Release and a video plus slides from the launch event.
Advantage magazine article.
Media coverage
Coverage in Independent, Guardian, Mirror, Evening Standard, and Global Citizen. Plus Op-eds in the Times, Guardian, and Independent.
Capital gains (the profits from disposing of an asset for more than it was worth when you acquired it) are generally excluded from analysis of incomes in the UK, despite being a significant driver of some people’s lifetime living standards. This Resolution Foundation Report looks at what we know about taxable capital gains; how our understanding of top income shares changes if we include capital gains in our analysis; and whether definitions of income used in official statistics should be changed or supplemented.

Capital Gains and Inequality
A. Advani and A. Summers (2020), CAGE Working Paper 465
Data on joint distribution of income and gains.
Policy Brief drawing out some of the key points, even shorter Advantage magazine article, and a longer Report with recommendations for the ONS.
Resolution Foundation Press Release and Warwick news story.
Media coverage
Coverage in Independent, Guardian, Mirror, Evening Standard, Tax Notes, and Global Citizen. Later discussion in the FT. Plus Op-eds in the Times, Guardian, and Independent.
Aggregate taxable capital gains in UK have tripled in past decade. Using confidential administrative data on the universe of UK taxpayers, we show that including gains changes the picture of UK inequality over the past two decades. These taxable gains are largely repackaged income, so their exclusion biases the picture of inequality. Including them changes who is at the top of the distribution, adding more business owners and older people. The share of income plus gains (both pre- and post-tax) going to the top 1% is 3pp higher than for income only, and this gap has been steadily rising.

Wealth Inequality

Who are the super-rich? The wealth and connections of the Sunday Times Rich List
A. Advani, A. Summers and H. Tarrant (2022), CAGE Policy Briefing 37
Media coverage
Coverage in Independent.
This CAGE Policy Briefing studies the individuals who make up the UK's Sunday Times Rich List (STRL). These are the 1000 richest people or families with strong ties to the UK. We link together information in the STRL with multiple other data sources to analyse the foreign connections of STRL members, the industries with which they are associated, and their corporate ties to UK land and property. One in seven appear not to be UK resident for tax purposes. Among billionaires, one in seven are located in tax havens. Collectively they own almost £2 trillion in UK wealth.

A wealth tax for the UK
A. Advani, E. Chamberlain and A. Summers (2020), Final Report of the Wealth Tax Commission
Media coverage
Blog pieces at Campaign for Social Science and LSE Business Review.
BBC, FT, Guardian, Sky, Telegraph, and Times, and other coverage.
This report presents the final findings of the Wealth Tax Commission into whether the UK should have a wealth tax. It concludes that if the government chooses to raise taxes in response to COVID, it should implement a one-off wealth tax in preference to increasing taxes on work or consumption.

Measuring and taxing top incomes and wealth
A. Advani and A. Summers (2022), CAGE Working Paper 580
Data for the charts.
In this paper we discuss first the measurement of financial inequalities, focusing on top income and wealth shares. We then consider the scope for policy reforms to tackle some of the issues raised.

Official statistics underestimate wealth inequality in Britain
A. Advani and H. Tarrant (2022), LSE Blog (also available via CAGE)
Data for the charts.
The latest statistics on Household Total Wealth in Great Britain from the ONS are a welcome but limited insight into what has been happening to wealth in Great Britain. Limitations in survey response means they will underestimate the share of wealth at the top. While they will not tell us what has happened as a result of the pandemic, we can use them to provide an educated guess.

The case for a one-off wealth tax
A. Advani, E. Chamberlain and A. Summers (2021), Tax Journal
A thoughtful analysis appeared in this journal of our final report on a wealth tax for the UK (‘The Wealth Tax Commission’s final report’ (P Barclay, G Price & T Schlee), Tax Journal, 8 January 2021). For a full discussion of the final report, we would refer readers to the frequently asked questions that deal with some of the misunderstandings that have emerged and the longer final report (or for a quick read the executive summary). However, we here respond to some specific points raised in the article.

The UK’s wealth distribution and characteristics of high-wealth households
A. Advani, G. Bangham and J. Leslie (2021), Fiscal Studies
(an earlier version appeared as Wealth and Policy Working Paper 101)
Data for the charts.
Media coverage
Coverage in the: Times, Guardian, Sun, Express, Metro, Ekklesia, Law 360. Plus Op-eds in the Times, and i newspaper.
Household wealth is profoundly important for living standards. We show that wealth inequality in the UK is high and has increased slightly over the past decade as financial asset prices increased in the wake of the financial crisis. But data deficiencies are a major barrier in understanding the true distribution, composition and size of household wealth. We find that the most comprehensive survey of household wealth in the UK does a good job of capturing the vast majority of the wealth distribution, but that nearly £800 billion of wealth held by the very wealthiest UK households is missing. We also find tentative evidence to suggest that survey measures of high-wealth families undervalue their assets – our central estimate of the true value of wealth held by households in the UK is 5% higher than the survey data suggests.

Revenue and distributional modelling for a wealth tax
A. Advani, H. Hughson and H. Tarrant (2021), Fiscal Studies
(an earlier version appeared as Wealth and Policy Working Paper 113)
Economics Observatory column summarising some of the key points.
Tax Simulator so you can build your own wealth tax.
In this paper we model the revenue that could be raised from an annual and a one-off wealth tax of the design recommended by Advani, Chamberlain and Summers (2020). We examine the distributional effects of the tax, both in terms of wealth and other characteristics. We also estimate the share of taxpayers who would face liquidity constraints in meeting their tax liability. We find that an annual wealth tax charging 0.18% on wealth above £500,000 could generate £10 billion in revenue, before admin costs. Alternatively, a one-off tax charging 4.8% (effectively 0.96% per year, paid over a 5-year period) on wealth above the same threshold, would generate £250 billion in revenue. To put our revenue estimates into context, we present revenue estimates and costings for some commonly-proposed reforms to the existing set of taxes on capital.

Is it time for a UK Wealth Tax?
A. Advani, E. Chamberlain and A. Summers (2020), Initial Report of the Wealth Tax Commission
Video from the launch event.
Media coverage
Times Red Box article (ungated). and coverage in Financial Times, and Times.
This report introduces the UK Wealth Tax Commission, which will evaluate whether a wealth tax for the UK would be desirable and deliverable. To do this we have commissioned a series of Evidence Papers that will study each of the key issues in detail. In this report we set out initial evidence on what has been happening to wealth and wealth taxation in the UK. We examine the provisional case for a wealth tax, and map some of the difficulties in implementing it. Our intention here is not to provide the answers, but to illustrate the key issues this project will address and set out the path to our final report in December, which will contain our conclusions on whether or not the UK should have a wealth tax, and if so, how it should be designed.


Tax

Tax Design

Reforming the non-dom regime: revenue estimates
A. Advani, D. Burgherr and A. Summers (2022), CAGE Policy Briefing 38
Data for the charts.
Video summary.
Media coverage
Coverage in Guardian, Independent and Financial Times. Op-ed by us in New Statesman.
This CAGE Policy Briefing studies the offshore income and capital gains of the UK's ‘non-doms’ – individuals who are resident in the UK but who claim on their tax return that their permanent home (‘domicile’) is abroad. We use de-identified confidential data accessed via HMRC to analyse all individuals who have claimed non-dom status between 1997 and 2018. We show non-doms at least £10.9 billion in offshore income and gains. Most of these unreported income and gains (55%) belong to non-doms who arrived in the UK in the past five years. Looking at previous reforms that restricted access to the non-dom regime, we see these led to very little emigration. Those who did leave were paying hardly any tax. Consequently, abolishing the non-dom regime would raise at least £3.2 billion even after accounting for migration and other tax planning, and the loss of existing revenue from the remittance basis charge.

The UK’s ‘non-doms’: Who are they, what do they do, and where do they live?
A. Advani, D. Burgherr, M. Savage and A. Summers (2022), CAGE Policy Briefing 36
Data for the charts.
Longer working paper.
This CAGE Policy Briefing studies the UK's ‘non-doms’ – individuals who are resident in the UK but who claim on their tax return that their permanent home (‘domicile’) is abroad. We use de-identified confidential data accessed via HMRC to analyse all individuals who have claimed non-dom status between 1997 and 2018. We show non-doms are globally connected and economically elite: almost all were either born abroad or have lived abroad for substantial periods, and their incomes are very high. Non-doms are highly likely to work in finance and other ‘City’ jobs. They tend to come from Western Europe, India and the US. Within the UK they largely reside in and around London, although there are sizeable shares in Oxford and Cambridge, working in research and education, and in Aberdeen, working in oil.

The UK’s Global Economic Elite: A sociological analysis using tax data
A. Advani, D. Burgherr, M. Savage and A. Summers (2022), CAGE Working Paper 570
Data for the charts.
Policy Brief summarising some of the key points.
In this paper we show the importance of international ties amongst the UK’s global economic elite, by exploiting administrative data derived from tax records. We show how this data can be used to shed light on the kind of transnational dynamics which have long been hypothesised to be of major significance in the UK, but which have previously proved intractable to systematic study. Our work reveals the enduring and distinctive influence of long-term imperial forces, especially to the former ‘white settler’ ex-dominions which have been called the ‘anglosphere’. These are allied to more recent currents associated with European integration and the rise of Asian economic power. Here there are especially strong ties to the ‘old EU-6’ nations of France, Germany, Netherlands, Belgium, Luxembourg, and Italy. The incredible detail and universal coverage of our data means that we can study those at the very top with a level of granularity that would be impossible using traditional survey sources. We find compelling support for the public perception that non-doms are disproportionately highly affluent individuals who can be viewed as a part of a global elite. However, whilst there is some evidence for the stereotype of the global wealthy parking themselves in the UK, this underplays the significance of the working rich. Our analysis also reveals the remarkable concentration of non-doms in central areas of London.

Measuring and taxing top incomes and wealth
A. Advani and A. Summers (2022), IFS Deaton Review of Inequalities
Data for the charts.
In this paper we discuss first the measurement of financial inequalities, focusing on top income and wealth shares. We then consider the scope for policy reforms to tackle some of the issues raised.

The taxation of capital gains: principles, practice, and directions for reform
A. Advani (2021), Canadian Tax Journal (invited)
Capital gains are particularly complex to tax given their infrequency, the different ways in which they are generated, and worries about harming productivity. There are theoretical arguments in support of everything from zero rates to high rates of tax on capital. In this paper, I first discuss the impact of capital gains on inequality, which often motivates discussions about how gains should be taxed. I then set out the principles that determine how gains should be taxed, in particular how the tax rate should relate to income tax rates. I propose that capital gains tax rates be equalized with income tax rates, subject to provisions to allow gains to be ‘smoothed’ over time and to remove inflation from the tax base. I highlight key transitional issues in moving to such a tax structure. Finally, I discuss the specific lessons for Canada.

Fixing the gaps in National Insurance: A better way to fund social care
A. Advani, H. Hughson, A. Summers and H. Tarrant (2021), CAGE Policy Briefing 33
Data for the charts.
Media coverage
This CAGE Policy Briefing studies alternatives to the government’s new Health and Social Care Levy. Using publicly accessible tax data from HMRC, we find that removing the current National Insurance exemptions for investment income and people of pension age would raise £12 billion. This is the same amount of revenue as the Government is targeting from its new Levy. Equalising National Insurance on higher earnings with the rates already paid by lower earners could raise an additional £20 billion. This would be enough to fund a cut in the main rate of NICs by 1.25p, instead of raising these rates, as the government is planning. Under this alternative package of reforms, more of the revenue would come from London and the South East, and from older, wealthier individuals.

Taxes on wealth: time for another look?
A. Advani, H. Miller and A. Summers (2021), Fiscal Studies
(Introduction to Special Issue on a Wealth Tax)
This paper introduces a special issue on a Wealth Tax, which draws together the latest thinking on wealth taxes with the aim of filling this gap. It draws heavily on international experience and evidence, applying these insights to the UK context. The papers build on work undertaken for the Wealth Tax Commission, which delivered its final report in December 2020. The contributors to this special issue include tax practitioners and academic lawyers as well as economists, reflecting our view that this range of expertise is essential to evaluating the practice, as well as principles, of a wealth tax. In this paper we touch upon some common themes arising across the papers. We also highlight some important remaining gaps in the evidence base on wealth taxes, particularly on the measurement of wealth and behavioural responses at the very top of the wealth distribution.

Revenue and distributional modelling for a wealth tax
A. Advani, H. Hughson and H. Tarrant (2021), Fiscal Studies
(an earlier version appeared as Wealth and Policy Working Paper 113)
Economics Observatory column summarising some of the key points.
Tax Simulator so you can build your own wealth tax.
In this paper we model the revenue that could be raised from an annual and a one-off wealth tax of the design recommended by Advani, Chamberlain and Summers (2020). We examine the distributional effects of the tax, both in terms of wealth and other characteristics. We also estimate the share of taxpayers who would face liquidity constraints in meeting their tax liability. We find that an annual wealth tax charging 0.18% on wealth above £500,000 could generate £10 billion in revenue, before admin costs. Alternatively, a one-off tax charging 4.8% (effectively 0.96% per year, paid over a 5-year period) on wealth above the same threshold, would generate £250 billion in revenue. To put our revenue estimates into context, we present revenue estimates and costings for some commonly-proposed reforms to the existing set of taxes on capital.

Behavioural responses to a wealth tax
A. Advani and H. Tarrant (2021), Fiscal Studies
(an earlier version appeared as Wealth and Policy Working Paper 105)
In this paper, we review the existing empirical evidence on how individuals respond to the incentives created by a net wealth tax. Variation in the overall magnitude of behavioural responses is substantial: estimates of the elasticity of taxable wealth vary by a factor of 800. We explore three key reasons for this variation: tax design, context, and methodology. We then discuss what is known about the importance of individual margins of response and how these interact with policy choices. Finally, we use our analysis to systematically narrow down and reconcile the range of elasticity estimates. We argue that a well-designed wealth tax would reduce the tax base (of reported wealth) by 7-17% if levied at a tax rate of 1%.

Capital Gains and Inequality
A. Advani and A. Summers (2020), CAGE Working Paper 465
Data on joint distribution of income and gains.
Policy Brief drawing out some of the key points, even shorter Advantage magazine article, and a longer Report with recommendations for the ONS.
Resolution Foundation Press Release and Warwick news story.
Media coverage
Coverage in Independent, Guardian, Mirror, Evening Standard, Tax Notes, and Global Citizen. Later discussion in the FT. Plus Op-eds in the Times, Guardian, and Independent.
Aggregate taxable capital gains in UK have tripled in past decade. Using confidential administrative data on the universe of UK taxpayers, we show that including gains changes the picture of UK inequality over the past two decades. These taxable gains are largely repackaged income, so their exclusion biases the picture of inequality. Including them changes who is at the top of the distribution, adding more buiness owners and older people. The share of income plus gains (both pre- and post-tax) going to the top 1% is 3pp higher than for income only, and this gap has been steadily rising.

Tax Compliance

The Dynamic Effects of Tax Audits (ungated)
A. Advani, W. Elming, and J. Shaw (forthcoming), Review of Economics and Statistics
(earlier versions appeared as CAGE Working Paper 414 and IFS Working Paper W17/24)
Explainer video.
Briefing Note drawing out some of the key points. IFS Press Release, Advantage magazine article, and Warwick news story.
Media coverage
In context of 2017 Tax Gap release: Financial Times, Times, Guardian, Sun, Mirror, Daily Express, City AM, Accountancy Live, economia (ICAEW magazine), The Week, Your Money, Business Advice, Business Matters, The Caterer, NewsR, Phys.org.
In context of Paradise Papers: Huffington Post, cross-posted at MSN Money and Yahoo News.
In context of 2018 Tax Gap release: The Times.
In context of 2019 Tax Gap release: Financial Times, Independent, and Tax Notes.
Other mentions: The Economist.
We study the effects of audits on long run compliance behaviour, using a random audit program covering more than 53,000 tax returns. We find that audits raise reported tax liabilities for five years after audit, effects are longer lasting for more stable sources of income, and only individuals found to have made errors respond to audit. 60-65% of revenue from audit comes from the change in reporting behaviour. Extending the standard model of rational tax evasion, we show these results are best explained by information revealed by audits constraining future misreporting. Together these imply that more resources should be devoted to audits, audit targeting should account for reporting responses, and audit threat letters miss a key benefit of audit

Who does and doesn't pay taxes? (Academic paper)
A. Advani (forthcoming), Fiscal Studies
Advantage magazine article and Warwick news story.
We use administrative tax data from audits of self-assessment tax returns to understand what types individuals are most likely to be non-compliant. Non-compliance is common, with one-third of taxpayers underpaying by some amount, although half of aggregate under-reporting is done by just 2% of taxpayers. Third party reporting reduces non-compliance, while working in a cash-prevalent industry increases it. However, compliance also varies significantly with individual characteristics: non-compliance is higher for men and younger people. These results matter for measuring inequality, for understanding taxpayer behaviour, and for targeting audit resources.

Who does and doesn’t pay taxes? (Briefing note)
A. Advani (2017), IFS Briefing Note BN218
Press Release and Advantage magazine article.
This IFS Briefing note uses data from HMRC’s random audit programme to show which types of people are more likely to be under-reporting taxes and how their behaviour changes after a tax audit. The results are based on data from audits covering tax returns for the years 1999–2009.

Uncollected Tax Revenue – who is underpaying and what should we do about it?
A. Advani (2019), SMF-CAGE Briefing Paper
SMF Press Release and video from the launch event.
Media coverage
My Times Red Box article on this topic, coverage in the Financial Times, Moneywise, the Belfast Telegraph, MoneyAge and Mirage News.
In context of 2019 Tax Gap release: Financial Times, Independent, and Tax Notes.
This SMF-CAGE Briefing Paper explains which types of individuals are most likely to be non-compliant on their tax returns, and what can be done to improve compliance and raise tax revenue.


Migration

Taxation and migration by the super-rich
A. Advani, D. Burgherr, and A. Summers (2022), CAGE Working Paper 630
Data for the charts.
Policy Brief summarising some of the policy implications.
Using administrative data on the globally connected super-rich in the UK, we study the effect of a large tax reform on migration behaviour. Prior to 2017, offshore investment returns for ‘non-doms’ – individuals tax resident in the UK but with connections to other countries – were untaxed. Average offshore investment returns for these individuals exceeded £420,000; even without considering other types of income, this puts them in the top 0.2% of the population. A reform in 2017 brought long-stayers and UK-born non-doms into the standard tax system, reducing their effective net of average tax rate by between 8.8% and 13.0%. We find that migration responses were limited: our central estimate of the migration elasticity is 0.02, and across a range of specifications we can rule out elasticities larger than 0.5. Using reforms for the UK-born super-rich who were living abroad, we find that migration elasticities are limited even for recent arrivals, for whom our central estimate is 0.18. Assuming similar elasticities for all non-doms, abolition of the preferential regime would increase tax revenue collected from non-doms by £3.2bn (84%).

Importing Inequality: Immigration and the top 1 percent (Paper)
A. Advani, F. Koenig, L. Pessina and A. Summers (2020), CAGE Working Paper 508 (R&R, REStat)
Data for the charts.
Explainer video and VoxEU column summarising some of the key points.
Media coverage
Coverage in Forbes, FT, and Guardian. Plus Op-ed in the Times.
In this paper we study the contribution of migrants to the rise in UK top incomes. Using administrative data on the universe of UK taxpayers we show migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.1% as anywhere in the bottom 97% These high incomes are predominantly from labour, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Almost all (85%) of the growth in the UK top 1% income share over the past 20 years can be attributed to migration.

Importing inequality: Immigration and the top 1% (Blog)
A. Advani, F. Koenig, L. Pessina and A. Summers (2020), VoxEU
Media coverage
Coverage in Forbes, FT, and Guardian. Plus Op-ed in the Times.
Top incomes have grown rapidly in recent decades and this growth has sparked a debate about rising inequality in Western societies. This column combines data from UK tax records with new information on migrant status to show that that migrants are highly represented at the top of the UK’s income distribution. Indeed, migration can account for the majority of top-income growth in the past two decades and can help explain why the UK has experienced an outsized increase in top incomes.


Ethnicity/Race

Race Related Research in Economics and other Social Sciences
A. Advani, E. Ash, D. Cai and I. Rasul (2021), CAGE Working Paper 565 (forthcoming, Econometric Society Monograph Series)
Media coverage
Coverage in the Financial Times, and Vox column.
How does economics compare to other social sciences in its study of issues related to race and ethnicity? We assess this using a corpus of 500,000 academic publications in economics, political science, and sociology. Using an algorithmic approach to classify race-related publications, we document that economics lags far behind the other disciplines in the volume and share of race-related research, despite having higher absolute volumes of research output. Since 1960, there have been 13,000 race-related publications in sociology, 4,000 in political science, and 3,000 in economics. Since around 1970, the share of economics publications that are race-related has hovered just below 2% (although the share is higher in top-5 journals); in political science the share has been around 4% since the mid-1990s, while in sociology it has been above 6% since the 1960s and risen to over 12% in the last decade. Finally, using survey data collected from the Social Science Prediction Platform, we find economists tend to overestimate the amount of race-related research in all disciplines, but especially so in economics.

Economics and the study of race
A. Advani, E. Ash, D. Cai and I. Rasul (2021), VoxEU
Media coverage
Financial Times.
Also picked up in Resolution Foundation and Center for Global Development blogs.
In the wake of last summer’s Black Lives Matter protests, many have asked themselves what they are doing to tackle racial injustice. For economists, one central question is the extent to which the profession has examined the causes and consequences of racial inequality. This column reports evidence that race-related research in economic journals constitutes a far lower share than in comparable publications in sociology and political science. What’s more, economists over-estimate the extent of race-related research done by the profession. Understanding why economists produce so little race-related research is essential if the discipline is going to be able to reform.

Ethnic diversity in UK economics
A. Advani, S. Sen and R. Warwick (2020), IFS Briefing Note 307
Data for the charts.
Media coverage
Guardian, Telegraph, RF Top of the charts, and other coverage.
Cited by the FCDO as part of their next generation economics competition.
Economists are central to policymaking in the UK, and to providing the research that underpins that policymaking. Despite having this important role in society, economists are not very representative of society, with a well-documented under-representation of women in the profession. In this briefing note, we examine the ethnic diversity of academic economists who provide much of the research that ultimately feeds into policymaking. We use data from the Higher Education Statistics Agency (HESA) to look at which groups are more or less well represented as academic economic researchers. We then examine economics students, to understand both the source of current under-representation and the prospects for change. Finally, we study some of the barriers faced by economics students. We are not able to examine diversity among the large number of economists who work outside academia, due to a lack of data.

Economics in the UK has a diversity problem that starts in schools and colleges
A. Advani, R. Griffith and S. Smith (2019), VoxEU
Podcast discussion of the issues.
Media coverage
The Economist, Financial Times, Telegraph, and NewsCabal.
The future of UK economics is looking predominantly male and disproportionately privately educated. This column introduces #DiscoverEconomics – a campaign to increase diversity in economics led by the Royal Economic Society and with the support of a wide range of institutions involved in economic research, communication and policymaking, including the Bank of England, the Government Economic Service, the Society of Professional Economists and many leading research institutions. The campaign aims to attract more women, ethnic minority students, and students from state schools and colleges to study the subject at university.


Education

Gender differences in subject choice leads to gender pay gap immediately after graduation
A. Advani, S. Smith, B. Waltmann and X. Xu (2021), IFS Observation
Media coverage
Evening Standard, i News, Telegraph, and television coverage in India from WION following online discussion partially summarised by RT. Plus later coverage in the Telegraph and Evening Standard.
The gender pay gap opens up immediately after graduation, with male graduates earning 5% more than female graduates on average at age 25. Ten years after graduation – before most graduates start having children – the gender pay gap stands at 25%. Most of the initial gap can be explained by university subject choices, with women less likely to study subjects that lead to high-paying jobs: women make up just a third of graduates in economics, the subject with the highest financial returns, and two thirds of graduates in creative arts, the subject with the lowest returns. Subject choice continues contribute to the gender pay gap over time, but its relative importance fades as other factors (like having children and working part-time) come into play.

A Level Economics is a gateway to the economics profession
A. Advani, S. Sen and R. Warwick (2021), IFS Observation
The economics profession – and the current student population studying economics – is not representative of society, with women, some ethnic minorities, and state school students underrepresented. While more than 7% of private school boys doing an undergraduate degree were studying economics in 2018/19, less than 1% of state school girls were. We highlight that interventions aimed at changing this picture need to consider the choices students make early on in their educational career. A Level Economics is a key gateway to further study in the subject, but access to and take-up of this qualification varies substantially according to a student’s background. As a result, improving representation within the economics profession in the long-term must include steps to ensure young students understand what the subject involves and the opportunities it provides, and have the chance to study it before university.

Economics in the UK has a diversity problem that starts in schools and colleges
A. Advani, R. Griffith and S. Smith (2019), VoxEU
Podcast discussion of the issues.
Media coverage
The Economist, Financial Times, Telegraph, and NewsCabal.
The future of UK economics is looking predominantly male and disproportionately privately educated. This column introduces #DiscoverEconomics – a campaign to increase diversity in economics led by the Royal Economic Society and with the support of a wide range of institutions involved in economic research, communication and policymaking, including the Bank of England, the Government Economic Service, the Society of Professional Economists and many leading research institutions. The campaign aims to attract more women, ethnic minority students, and students from state schools and colleges to study the subject at university.


Environment

What is the case for carbon taxes in developing countries?
A. Advani, D. Prinz, A. Smurra and R. Warwick (2021), IFS Observation
Carbon pricing will be one of the most talked about policy options at COP26. The idea of carbon pricing is that putting a price on the emission of greenhouse gases (GHGs) to reflect the social costs of climate change should provide producers and consumers with strong incentives to reduce such emissions. In this observation, we consider the opportunities and risks from introducing carbon taxes in developing countries, with reference to Ethiopia and Ghana as case studies.

How Can Fiscal Policies Be Designed To Protect The Poor? The Equity-efficiency Trade-off in Environmental Taxation
A. Advani (2019), in Which way now? Economic policy after a decade of upheaval, CAGE Policy Report
A video covering some of the issues discussed.
This CAGE Policy Report chapter describes how policy can do more to protect the environment without having to hurt the least well-off.

Cheaper, Greener, and More Efficient: Rationalising UK Carbon Prices
A. Advani and G. Stoye (2017), Fiscal Studies
Current UK energy use policies, which primarily aim to reduce carbon emissions, provide abatement incentives which vary by user and fuel, creating inefficiency. Distributional concerns are often given as a justification for the lower carbon price faced by households, but there is little rationale for carbon prices associated with the use of gas to be lower than those for electricity. We consider reforms that raise carbon prices faced by households, and reduce the variation in carbon prices across gas and electricity use, improving the efficiency of emissions reduction. We show that the revenue raised from this can be recycled in a way that ameliorates some of the distributional concerns. Whilst such recycling is not able to protect all poorer households, existing policy also makes distributional trade-offs, but does this in an opaque and inefficient way.

Energy use policies and carbon pricing in the UK
A. Advani, S. Bassi, A. Bowen, S. Fankhauser, P. Johnson, A. Leicester, and G. Stoye (2013), IFS Report 84
Slides from the launch event. Press Release.
The report analyses and assesses: the rationale and objectives of energy policy; the current policy landscape faced by UK energy users; how current and future policy has led to inconsistencies in the implicit carbon prices faced by different users; and potential ways in which to improve policy affecting domestic and business energy users.

Household energy use in Britain: a distributional analysis
A. Advani, P. Johnson, A. Leicester, and G. Stoye (2013), IFS Report 85
Slides from the launch event. Press Release.
Government wants both to reduce carbon emissions and to reduce ‘fuel poverty’. Energy prices have risen in part because of a multitude of policies aimed at reducing emissions. There are also multiple policies aimed at ameliorating these effects. Altogether, this leads to a complex policy landscape, inefficient pricing and opaque distributional effects.
In this report, we show the effects of energy price rises over the recent past, look at what current policies mean for effective carbon prices and their impact on bills, and consider the distributional consequences of a more consistent approach to carbon pricing, alongside possible changes to the tax and benefit system that could mitigate these effects.

Inconsistent and inefficient UK carbon prices
A. Advani, P. Levell, and G. Stoye (2011), IFS Observation
An IFS Observation on the current state of carbon prices and environmental policy in the UK.

Hyping hypothecation: should green tax revenues be earmarked?
A. Advani, A. Leicester, and P. Levell (2011), IFS Observation
Cited in House of Commons Library Note SN01480
An IFS Observation on the costs of hypothecating green taxes.


Development

What is the case for carbon taxes in developing countries?
A. Advani, D. Prinz, A. Smurra and R. Warwick (2021), IFS Observation
Carbon pricing will be one of the most talked about policy options at COP26. The idea of carbon pricing is that putting a price on the emission of greenhouse gases (GHGs) to reflect the social costs of climate change should provide producers and consumers with strong incentives to reduce such emissions. In this observation, we consider the opportunities and risks from introducing carbon taxes in developing countries, with reference to Ethiopia and Ghana as case studies.

Insurance Networks and Poverty Traps
A. Advani (2019)
Featured in the World Bank Development Impact Blog, and as the top story in the Weekly Newsletter from the Financial Access Initiative
Poor households regularly borrow and lend to smooth consumption, yet we see much less borrowing for investment. This cannot be explained by a lack of investment opportunities, nor by a lack of resources available for investment. This paper provides a novel explanation for this puzzle: informal risk sharing can crowd out investment. I extend the canonical model of limited commitment in risk-sharing networks to allow for lumpy investment. The key insight is that the cost of losing insurance is lower for a household that has invested, since it has an additional stream of income. This limits its ability to credibly promise future transfers, and so limits its ability to borrow from other households. The key prediction of the model is a non-linear relationship between total income and investment at the network level – namely there is a network level poverty trap. I test this prediction using a randomised control trial in Bangladesh, that provided capital transfers to the poorest households. The data covers 27,000 households from 1,400 villages, and contain information on risk-sharing networks, income and investment. I exploit variation in the number of program recipients in a network to identify the threshold level of capital provision needed at the network level for the program to move the network out of a poverty trap and generate further investment. I also verify additional predictions of the model and rule out alternative explanations. My results highlight how capital transfer programs can be made more cost-effective by targeting communities at the threshold of the aggregate poverty trap.


Econometrics

Mostly Harmless Simulations? Using Monte Carlo Studies for Estimator Selection (ungated)
A. Advani, T. Kitagawa and T. Słoczyński (2019), Journal of Applied Econometrics
We consider two recent suggestions for how to perform an empirically motivated Monte Carlo study to help select a treatment effect estimator under unconfoundedness. We show theoretically that neither is likely to be informative except under restrictive conditions that are unlikely to be satisfied in many contexts. To test empirical relevance, we also apply the approaches to a real-world setting where estimator performance is known. Both approaches are worse than random at selecting estimators which minimise absolute bias. They are better when selecting estimators that minimise mean squared error. However, using a simple bootstrap is at least as good and often better. For now researchers would be best advised to use a range of estimators and compare estimates for robustness.

Credibly Identifying Social Effects: Accounting for Network Formation and Measurement Error
A. Advani and B. Malde (2018), Journal of Economic Surveys
Understanding whether and how connections between agents (networks) such as declared friendships in classrooms, transactions between firms, and extended family connections, influence their socio-economic outcomes has been a growing area of research within economics. Early methods developed to identify these social effects assumed that networks had formed exogenously, and were perfectly observed, both of which are unlikely to hold in practice. A more recent literature, both within economics and in other disciplines, develops methods that relax these assumptions. This paper reviews that literature. It starts by providing a general econometric framework for linear models of social effects, and illustrates how network endogeneity and missing data on the network complicate identification of social effects. Thereafter, it discusses methods for overcoming the problems caused by endogenous formation of networks. Finally, it outlines the stark consequences of missing data on measures of the network, and regression parameters, before describing potential solutions.

Methods to Identify Linear Network Models: A Review
A. Advani and B. Malde (2018), Swiss Journal of Economics and Statistics (solicited)
In many contexts we may be interested in understanding whether direct connections between agents, such as declared friendships in a classroom or family links in a rural village, affect their outcomes. In this paper we review the literature studying econometric methods for the analysis of linear models of social effects, a class that includes the `linear-in-means' local average model, the local aggregate model, and models where network statistics affect outcomes. We provide an overview of the underlying theoretical models, before discussing conditions for identification using observational and experimental/quasi-experimental data.

Empirical Methods for Networks Data: Social Effects, Network Formation and Measurement Error
A. Advani and B. Malde (2014), IFS Working Paper W14/34
Parts of this Working Paper have been published as Credibly Identifying Social Effects and Methods to Identify Linear Network Models.
Based on this survey we have given presentations on collecting network data in surveys and identifying social effects from policy experiments.
In many contexts we may be interested in understanding whether direct connections between agents, such as declared friendships in a classroom or family links in a rural village, affect their outcomes. In this paper we review the literature studying econometric methods for the analyis of social networks. We begin by providing a common framework for models of social effects, a class that includes the ‘linear-in-means’ local average model, the local aggregate model, and models where network statistics affect outcomes. We discuss identification of these models using both observational and experimental/quasi-experimental data. We then discuss models of network formation, drawing on a range of literatures to cover purely predictive models, reduced form models, and structural models, including those with a strategic element. Finally we discuss how one might collect data on networks, and the measurement error issues caused by sampling of networks, as well as measurement error more broadly.