Magnus Eldrup

Email: mel@econ.ku.dk
Affiliation: University of Copenhagen
Fields: Public economics, development, taxation
CV: PDF

Hi there. I am a PhD student at the University of Copenhagen with the Development Economics Research Group (DERG). Through my research I try to help better understand issues of taxation in developing countries, especially as it pertains to the interplay between the formal and the informal sector.

Before embarking on my PhD I completed the Msc. in Economics for Development at the University of Oxford and an MA. in Economics from the University of Copenhagen. In the fall of 2025 I visited the Harvard Kennedy School as a PhD Fellow.

Job Market Paper

Horizontal Inequality in Optimal Taxation: Evidence from a Development Context
Job Market Paper

Presented at CSAE 2026, KIEL-CEPR AEDC 2025 and NPPS 2025

Recipient of grants from the Nordic Tax Research Council, The Structural Transformation and Economic Growth (STEG) programme, and the Ministry of Foreign Affairs of Denmark (DANIDA)

Abstract (click to expand) · Working Paper

Exemptions are a key feature of income tax systems in developing countries, yet standard optimal tax models cannot explain them. By assuming full compliance, these models ignore horizontal inequality between formal and informal workers, understating the social cost of taxing the former. Extending the optimal tax framework, I incorporate informality and horizontal inequality aversion. I conduct a survey experiment in Kenya, finding that respondents place substantially higher welfare weight on formal taxpayers than otherwise identical informal workers. Combining these empirical preferences with administrative tax data yields prescriptions of high exemption thresholds, a result alternative explanations such as extensive margin responses or administrative costs cannot rationalize.

Other Ongoing Research

Optimal Enforcement of Redistributive Taxation
with Claus Thustrup Kreiner

Presented at CEPR Public Economics 2026, CESifo Public Economics Conference 2025 and IIPF 2025

Tax Administration and VAT Neutrality: Theory and Evidence from Kenya
with Cyrus Mutuku and Bjørn Bo Sørensen

Presented at NCDE 2026

Abstract (click to expand)

Production efficiency is a central rationale for the VAT, but it is unclear whether it can be preserved when firms produce outputs subject to different tax treatment. We study this question through a 2019 reform of Kenya’s VAT refund apportionment formula using linked administrative tax and refund data. A one percentage point reduction in the marginal wedge induced firms to reorient production sharply toward zero-rated output, increasing zero-rated sales and total sales by about 5 percent of pre-reform sales and raising employment by 2–4 percent. Aggregating these estimates implies an increase in covered firms’ exports equivalent to roughly 3 percent of Kenya’s total goods exports. We develop a model that formalizes these distortions and shows they are inherent: source-based refund formulas cannot, in general, simultaneously preserve profit neutrality and marginal incentives when input use is unobserved. Our new database covering 182 countries shows that such source-based systems are the dominant global refund architecture, covering roughly two-thirds of the population living in countries with a VAT.

A Worker’s Worth
with Paolo Falco and Andreas Menzel

Recipient of IGC grant ETH-24324

Field work in progress

Can AI Predict Top Five? Gender Bias in LLM Forecasts of Academic Excellence
with Paolo Falco and Sarah Zaccagni

Policy Work

Reforming Excise Taxation on Alcohol Products in Kenya and Reforming Excise Taxation on Tobacco Products in Kenya
with Alex Oguso, James Ochieng’, Nathan Remcho & Hellen Chemnyongoi

Media

Dagbladet Information: Comment on Climate-tied Aid (Danish)

Politiken: Comment on Differentiated VAT (Danish)