Paradigm Shift: Transforming Policy Design into Evidence-based Policy Design

The following paragraphs address the existing phenomena of low attrition of research evidence in the design process of policies to improve our planet, its causes and what can be done to improve on it.

While there is no doubt that there are areas that lack robust research evidence, other areas do not make sufficient use of research available evidence till today. One should think that policies, as a matter of fact, are always the fine tuned product that coming into existence based on sound preparation and research – especially because there is barely a “roll back” for an executed policy. However, numerous authors like DuFlo , Dhaliwal and Tulloch , or Spiel and Strohmeier , stress the slow and incomplete uptake of research findings and highlight the lack of intensive cooperation between researchers, politicians and administrators when it comes to development and implementation of sustainable policies.

As a result of the low attrition, the term evidence-informed policy making (EIPM) was coined. In recent years, the uptake of evidence already increased positively, however still only a small subset of development programs is covered. In education for example, Spiel and Strohmann examine the development of a national strategy for violence prevention in the Austrian Public School System as a successful example for establishing a sustainable cooperation between research, policy, and practice. Is mere evidence-informed policy feasible? Frankly: No ; policymakers and politicians have political, technical, financial and time constraints that cannot be abandoned for pure EIP, but one has to argue that the uptake of evidence is so low, that there is still enormous scope to incorporate evidence in decision making, despite the presents of constraints.

Why not more of this? In the core, we can observe three major issues: First of all there is scarcity of robust research evidence, secondly, evidence is generally compounded by the technical language of research journals where it is usually published – seeming to be formulated merely for an elitist group of individuals and lastly, there are not sufficiently enough working means of communication of results to a policy audience that ensure an automatic transfer. Policymakers may have difficulties comparing different studies , especially if there is not clear guidance on how to relate new evidence to the existing research. If one would want to find the best intervention to increase school attendance in Sub-Saharan, should he or she commit to constructing new buildings, encourage community involvement, treat children for intestinal worms, or introduce something else like conditional cash transfers?

What can be done about these challenges? Dhaliwal and Tulloch  have presented how the gaps could be filled that they have observed between research and policymaking together with their colleagues of the Abdul Latif Jameel Poverty ActionLab (J-PAL). First of all you could create policy tools that allow for effective communication of finings to partners. Examples would be policy briefcases and a cost-benefit analysis which includes the ratio of program impact and incurred costs.
To encourage policymakers to make more use of rigorous evidence and promote a culture of evidence based decision making, companies like J-PAL conduct executive research courses with participants in key decision making roles in federal and state governments as well as international development organizations. The ultimate goal of this should be to foster partnerships between researchers and policymakers. However there are some barriers that cannot all be presented in this blog post, but are illustrated in Table 1 below. J-PAL for example has dedicated staff responsible for only answering policymaker’s requests, like identifying researchers for a planned program, or to send relevant information and presentations on a pressing policy issue. This is also facilitated through the conduction of conferences to provide a platform for finding matches and share knowledge. A successful example of this is the Chilean ‘Compass Commission’ . The Chilean Ministry has approached J-PAL to convene a commission to find out the most pressing social problems that the country faces and to brainstorm and evaluate innovative interventions to tackle them. The result was the Compass Commission which is like a taskforce that consisted of leading academics and policymakers from all over the world, ultimately submitting a report to the Chilean President in 2011.

The approaches outlined above may not present the best action alternatives for everyone as stakeholders may have very specific needs. However, the key message from this statement is to encourage committed individuals and organizations whose mission is similar to mine or J-PAL’s: Ensuring that policy is driven by evidence and research is translated into action.

Table 1


Universal Allowance per Child for social protection in Argentina and its effects on labour formalization

According to the INDEC (the National Institute of Statistics and Census from Argentina), poverty in Argentina reached the 32,3% of the population in 2016. To fight poverty the government takes into practice a low-income support program called the Universal Allowance per Child for social protection. It consists of a monthly payment made by the ANSES (the National Social Security Administration) to families with children age under 18 and with a maximum of 5 children. In addition, it gives priority to disabled and the younger children. Besides, one of the two parents is paid, and the mother is prioritized.

People who receive this aid must fulfil certain requisites and conditions. This payment is transfer to people who is unemployed, to workers in the informal sector with incomes lower or equal to the minimum wage, independent workers, workers from the domestic service, and people who receive certain programs offered by the government. Moreover, the beneficiary and its family need to be registered in the ANSES. It is also required an annual schooling certification of the children and health controls. As regards the amount of money instalment, this depends on the income of the family. The families with the lowest income receive a payment of $1246 (77 EUR). And the ones with the highest income receive a payment of $258 (15,88 EUR).

The Universal Allowance per child caused different impacts. These ones include social, economic, educational and labour impacts. One of the most relevant is the negative effect on labour formalization. According to the research made by Agis, Cañete and Panigo, the welfare indicators improved with this low-income support program, mainly in the poorest regions of Argentina. In addition, they found that the indigence indicators reduced from 55% to 70%, and inequality more than 30%. Further, this program was able to reduce the probability of indigence of the most vulnerable group below the one of the rest of the society. Finally, it also decreased the poverty indicators. The authors think that although the program has positive impacts it has to be complemented with other labour policies. Kliksberg and Novacovsky evaluated the impacts of the program and concluded that it significantly increased the amount of health controls of children and teenagers. Besides, it rose the school attendance rates and guarantee the access to education since the first years of life.

As regards labour formalization, there are different researches that suggest that the Universal Allowance per Child has a negative impact on it. Gasparini and Garganta made an econometric study and obtained that the formalization of people not eligible for the program accelerated with the economic recovery (after 2009), while the formalization rate of the eligible people remains standstill. They concluded that the probability of formalization of the eligible ones is reduced approximately 40% with respect to what would happen without the program. They point out an interesting result that is the fact that the program does not encourage registered workers to become informal ones. Moreover, Sticco says in an interview with La Nación newspaper that this program discourages the participation in the labour market because people need to comply the requisite of earning an income below the minimum wage, therefore it will encourage labour precariousness and informality. On the contrary, there are other authors such as Boffi that studied that there is no evidence to state that the beneficiaries from the program reject a job opportunity from the formal sector.

In conclusion, the low-income support program called Universal Allowance per Child applied in Argentina has impacts in different issues. On the one hand, positive effects can be observed in education, health and levels of indigence. This may probably be caused by the condition of having an annual schooling certification and health care controls in order to receive the transfer. On the other hand, there are negative effects on the labour market since, as different authors suggest, it discourages formalization. This may mainly be provoked by the fact that beneficiaries must earn an income lower than the minimum wage. And there might be other factors that discourage people to enter the formal labour market.

Delfina Murisengo

Taxation on alcohol: decreasing society’s burden and increasing welfare

According to the World Healthcare Organization (WHO) estimations, Portugal is the 11th higher consumer of alcohol per capita in the world. You may consider that drinking is part of the Portuguese “life style”, and that it is a cultural matter that we should stay out of. But should we?

In 2013, of all Portuguese deaths, 2.2% were attributable to alcohol consumption. Moreover, there is a health, social and economic burden borne by the society due to the harmful consumption of alcohol: (1) direct costs in health, police, criminal justice, unemployment and welfare systems; (2) indirect costs due to loss in workforce productivity; and (3) intangible costs like diminished quality of life of drinkers and the people linked to them. Broadly, it is estimated that the cost of alcohol to society, on average, in high-income countries, is 2,5% of GDP.

However, we should preserve the health benefits of the moderate alcohol consumption. So my kick off question is: is the Portuguese population drinking moderately?

According to the 2014 report, “A Situação do País em Matéria de Álcool”, the consumption of alcohol per capita in Portugal is 12,9 litres of pure alcohol per year, which is above the 10,9 average of Europe Region WHO. This suggests there is a drinking problem in Portugal that needs to be tackled. Moreover, a major concern is the harmful alcohol consumption of young adults. Youth evidenced 18% of binge consumption against 12% for all consumers. Same figures apply to severe intoxication (11% in youth against 6% in total population), being the 15-24 years-old the group with the highest prevalence. In addition, 46% of the 15-24 and 48% of 25-34 years-old consumes six or more alcoholic drinks in one occasion, which are the highest rates amongst all the decennials.

Therefore, there is a call for policy actions to tackle the behaviour of consumers, particularly young adults that might be endangering their future.

My suggestion to address this issue is increasing the taxation over alcoholic beverages, supported by the research “The Effectiveness of Tax Policy Interventions for Reducing Excessive Alcohol Consumption and Related Harms”, American Journal of Preventive Medicine. This research suggests that raising alcohol taxes is an effective strategy to reduce excessive alcohol consumption and its harms. Furthermore, it also suggests that the impact of a tax increase will depend on factors such as disposable income and the demand elasticity (how consumption changes with changes in prices) for alcohol. On this matter, “The Effects of Prices on Alcohol Use and its Consequences”, Alcohol Research & Health, found that youth is more responsive to price changes than the general population (an increase in the price of alcohol will decrease the consumption of alcohol in youth more than in the other groups, exactly what we want!).

As you can see in the statistics presented first, Portugal is struggling to reduce the harmful consumption of alcohol. Together with the previous arguments that the tax can decrease the consumption of alcohol, I believe that the optimal tax, which maximizes wellbeing and diminishes the cost of drunken people and their actions to the society, is higher than the tax in place right now.

Concluding, we should increase the tax on alcohol closer to the optimal tax!


Patrícia Sofia Pinto e Filipe

Master in Economics – Public Finance

Tobacco: Taxes and Prevalence of consumption by age groups.


There are several explanations for governments worldwide to continue increasing taxation of tobacco products. The main reasons are related with an economic and public health point of view.

Regarding the public health perspective, policy makers implemented higher cigarette taxes to save a substantial number of lives and reduce health care costs associated with smoking.

Secondly, taxation generates a relative stable and sustained source of revenues for governments. Also, cigarette excise taxes are inexpensive to implement and administratively easy to apply. States collected more than $17 billion in cigarette excise taxes in 2012.

As we can see by the graphs below, there is a negative relationship between cigarette consumption and cigarette taxes over the last years. While the price of tobacco growth the consumption/sales decrease and the government revenues arise.

To understand how taxation policies work, it is necessary to clarify the concept of elasticity.

The price elasticity of tobacco demand measures the responsiveness of cigarette consumption to changes in the price of cigarettes.
The demand for tobacco is inelastic, it means that people will not easily change their behavior regarding increases in price. However, as we can see by the graphs the demand for cigarettes has been decreasing since the 80’s and it could be related with several factors, for instead health issues, income effect and substitution effect.
The elasticity may not be always constant and may change between different ages.


The graph above results from study analysis made by Kevin Callison and Robert Kaestner (2014) and shows the effect of large cigarette tax increases on the smoking behavior of adults ages 18–74.
The elasticity is – 0.015, which is very small and not statistically significant. It indicates that a 1 percent increase in the cigarette tax would drop smoking among adults by 1.5 percent.

As we can perceive by the graph above, the elasticity change across the different ages.

For ages between 18-34 the elasticity is 0.040, which means that when the price increases by 1 % the quantity demanded decrease by 4 %.

Regarding the group with ages between 35-54 the elasticity is -0.013, it means when the price rises by 1 %, the quantity demanded falls by 1.3 %. and in the last set of ages 55-74 the elasticity is -0.022, when the prices arise by 1% the quantity demanded decreases by 2.2%

In conclusion, the demand for tobacco is more elastic in the first age group 18- 34. It makes sense because younger people tend to be more sensitive than adults to increases in tobacco prices because they have been smoking for less time and may be not so addicted. Furthermore, the fraction of disposable income spent on cigarettes by the young smoker is likely to be greater than that of an adult smoker.

The fact that older people reduced more the demand for tobacco could be related to the fact that they may be more awareness with their healthy or simply because they are a minority.

Economic Arguments for Legalizing Cannabis: Can Legalization Raise Government Revenue?

The Freetown Christania – a self-proclaimed autonomous neighborhood in Copenhagen – has been subject to massive police raids against the open-air illegal cannabis market, known as Pusher Street. However, the fight against illegal cannabis does not seem to be working, and last month a shooting accident in Christania resulted in one dead police officer. After more than two decades with failed attempts to clear Pusher Street, the discussion about the the potential of the Danish Government legalizing cannabis is still as relevant as ever. To support the legalization of cannabis, one may, besides the social impacts, also draw on economics reasoning by looking at its effect on public finances.

As with any other government regulation or implementation, the Danish Government should carry out a cost-benefit analysis, to weight the potential costs of legalizing cannabis against the benefits. In the report “Marijuana Legalization, Government Revenues, and Public Budgets: Ten Factors to Consider” (2016) by Beau Kilmer, which has been carried out for the state of Vermont (U.S.), potential costs and benefits of legalizing cannabis are discussed. Just like Vermont, the Danish Government should take into consideration the following budgetary effects: (1) current costs of enforcing marijuana prohibition, (2) the one-time cost of creating a new regulatory system in addition to, (3) the annual costs of maintain that system, and (4) the potential tax revenue from residents and non-residents. If the effects of 2-4 outweigh the effect of 1, then legalizing cannabis may have positive budgetary effects for the Danish State.

By legalizing cannabis, the main source of government revenue would a result of the possible taxation and fees. In choosing the tax rate, the government must decide on a balance between raising revenue and limiting the use of cannabis. It is a well-known fact that taxes distort the market and causes people to change behavior. A low tax rate is desirable to eliminate the black market, however a high tax rate is desirable to induce people to consume less cannabis. Therefore, the price and tax should be set just below the black market price to limit consumption and prevent citizens from buying from the black market.

Furthermore, the government should decide if it wants to tax production or consumption of cannabis, and if so, the government should determine whether the taxation will be fixed on the price, the weight, or the THC content. A tax on price will result in decreased revenue as prices fall, a tax on the weight may induce more potent products, and taxing the THC requires significant resources to set up and maintain such a regime. The government should also look to nearby countries, who might also legalize cannabis in the nearby future, as to see what kind of taxation model they consider implementing.

Revenues that the government may collect goes beyond sales and taxes on cannabis. The legalization may result in income taxes for those in the new industry and influence the consumption on other taxable goods. Thus, one must take into account the general equilibrium effects from legalizing and taxing cannabis, when evaluating the total government revenue that can be raised.  Data shows that positive revenues from taxation are very likely. For example, Colorado, which legalize recreational marijuana in 2012, raised in 2015 $135 million in taxes and fees from sales.

Copenhagen officials have not pushed to legalize cannabis since 2014, but maybe now is the time to take a new approach of legalizing cannabis to combat the crimes happening in Christiania while improving the public finances.

The Wealthy and the logistics of taxing their property: an overview of the new property tax

The creation of a new additional progressive tax on property is currently being discussed in Portugal. It is still unclear which properties will be affected as only those whose value is greater than 500,000 or 1 million euros (the decision on the value is being discussed) will be taxed. The new tax is an addition to the Real Estate Municipal Tax (IMI in Portuguese) which is planed to decrease in 2017 from a maximum level of 0,5% to 0,45%, while government revenue from this new additional tax will likely fall somewhere in the 100 million to 200 million euros range1.

The Portuguese real estate market has been subject to constant changes in its fiscal policies, which have potentially deterred much needed investment. According to Reis Campos, from the Confederation of Portuguese Construction and Real Estate, the decrease in investment due to the new tax will cost Portugal more than the gained government revenue1. This could be particularly true for foreign investors (which represent roughly 23% of market investment) who can invest elsewhere in search of more stable fiscal policies2. Furthermore, housing properties have been a positive saving scheme for middle incomers as renting property can be more profitable than long-term saving deposits with low-interest rates, especially considering the recent rise in tourism.

Though the new tax is only meant to target wealthy property owners, it seems unlikely they will be the only ones affected3. People who inherit property might not be able of affording an additional tax, as well as the maintenances and other housing-related expenditures. Furthermore, landlords can simply pass on the added tax costs to their tenants, potentially affecting common middle and low class citizens.

While it has been established that people with two non-luxurious houses will not pay the new tax, logistical issues need further improvement for this tax to remain socially fair4. The previous additional property tax had considerable short comings as it only applied to houses worth over one million euros (meaning people who had ten properties each worth just under one million euros didn’t have to pay the tax, but people with a single property worth marginally over one million euros did). This new tax helps address this issue (as it takes into consideration the total value of all properties people have, apart from the main family house) but is still far from optimal.

If the government’s goal is to target wealthy citizens rather than middle-incomers, then it would make sense to look at people’s liquid wealth rather than their properties assets5. The new tax could potentially allow for someone who buys himself a house worth just under half a million not to be taxed while someone who gets a loan to buy a house worth slightly over half a million to be taxed, whilst still paying off the loan and respective interests. Therefore, “wealth” should not be measured in terms of assets, but rather in what one can purchase on their own. As such, a solution could be a tax exemption for people still paying off house loans back.

The new tax therefore presents a hard challenge to Portuguese policy makers given the need to prevent a massive market destabilization in real estate, as well as reassuring investors whilst minimizing potential unwanted consequences to lower-incomers and middle classes.

By: Tiago Polleri Falcão


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Taxing sharing: is sharing really caring?

A saying goes that “sharing is caring” – but how about the sharing economy? As of the past decade, the economy has been changing by the upcoming of new businesses taking part in the “shared economy”. The shared economy is based on individuals sharing resources – physical, human or intellectual – usually through a digital marketplace provider. Thus, an individual may provide a service or rent an asset they control, to some other individual or group, and the shared economy business provides the platform for contact between provider and consumer. For example in the case of the popular ride-sharing service, Uber, one individual provides a taxi service to another individual, where communication and payment is enabled by a smartphone app. Regarding this new kind of shared businesses, there are several issues that needs to be addressed, especially in terms of taxing.

The shared economy certainly entails many benefits. To mention a few: it’s providing services and goods at cheaper costs for consumers, enabling providers to earn an extra income, recycling and lending eases the pressure on the world’s limited resources, etc.

However, the drawbacks of taxing the shared economy businesses should not be ignored. The issues arise, because in contrast to the traditional businesses with a good/service provider and a consumer, the shared economy includes an additional party, usually a digital marketplace provider, enabling the transactions ( As in the case of Uber, besides the chauffeur and the consumer, there is the provider of the app. The payment is made from consumer to provider, through the digital platform. The owner of the digital platform take a cut of the payment.

A new tax system must address who, where and how this shared economy should be taxed. Should the provider or the business be paying the income tax? Where – in which country and at which government level – should the corporate tax be collected? How should the shared economy be taxed in comparison to traditional businesses?

Currently, it is the service providers, with little experience with requisite tax record-keeping, who is responsible for the tax reporting. The system is ineffective, since it is both time consuming for the providers and costly for the tax administrators. If the digital platforms are required to classify the providers as employees, then it would be the companies’ responsibility to ensure income taxes, unemployment taxes, etc. are being paid.

The sharing companies will often avoid paying corporate taxes in the countries they operate by utilizing the opportunity for international tax planning.  If the new form of businesses goes untaxed, government inaction will result in distortionary market effects and potentially reduce economic growth. Also, if the sharing companies outcompete existing traditional companies, and these new companies are untaxed, the government will face revenue losses (

In conclusion, there are several issues regarding the taxation of the shared economy. In my opinion, if our current tax-system is not adapting quickly to the changing economy and the related tax issues, this may, everything else equal, result in large revenue losses for the government. Thus, the shared economy may not be so caring – at least not concerning the public finances.