Digital Payments, Multidimensional Taxes

Project Information

DIPAMUTA

Grant agreement ID: 101055239

DOI

10.3030/101055239

EC signature date 11 July 2022

Start date 1 October 2022

End date 30 September 2027

Funded under

• European Research Council (ERC)

Total cost

€ 1 584 000,00

EU contribution

€ 1 584 000,00

Coordinated by

FONDATION JEAN JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES
France

Periodic Reporting for period 1 - DIPAMUTA (Digital Payments, Multidimensional Taxes)

Reporting period: 2022-10-01 to 2025-03-31

Summary of the context and overall objectives of the project

Our economies have been jeopardized by digitalization. Economic theory should take into account the fundamental changes in the way we produce, consume, invest and pay our bills that we have experienced lately. In particular, there is an enormous potential to improve the efficiency of the way in which governments finance public expenditures.
The project had initially three objectives:
1) Develop a general algorithm for solving multidimensional screening problems.
2) Investigate optimal taxation systems in a model with financial frictions.
3) Assess the impact of the digitization of payments in our economies.
The recent crisis to public finances due to the over indebtedness of many governments has prompted us to add an additional objective:
4) Develop tools for assessing sovereign debt sustainability in an advanced economy.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

On topic 1 we have explored and summarized the existing literature on multidimensional screening models. We have also developed an algorithm for solving multidimensional screening problems which are intractable analytically.
On topic 2 we have developed a theoretical model of optimal taxation that is able to reproduce income and wealth inequalities in the USA.
On topic 3 we have organized, in collaboration with the Banque de France, an international conference on the impact of digital payments, where our own research was presented together with many theoretical and empirical contributions by the best specialists of these issues.
On topic 4 we have provided a simple model of sovereign debt sustainability and applied it to the countries in the Euro area.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The new algorithm is a real breakthrough because it has a very wide set of potential applications, including multidimensional taxation, or pricing and product design policies by multi product firms.