Tax morale and (de-)centralization: An experimental study
AbstractWe consider an economy composed of two regions. Each of them provides a public good whose benefits reach beyond local boundaries. In case of decentralization, taxes collected by members of a region are spent only on that region's public good. In case of centralization, tax receipts from the two regions are pooled and used to finance both public goods according to the population size of each region. The experiment shows that centralization induces lower tax morale and less efficient outcomes. The reasons are that centralization gives rise to an interregional incentive problem and creates inequalities in income between regions. Copyright Springer Science + Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal Public Choice.
Volume (Year): 125 (2005)
Issue (Month): 1 (July)
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Web page: http://www.springerlink.com/link.asp?id=100332
Other versions of this item:
- Werner Güth & Vittoria Levati & Rupert Saugruber, 2005. "Tax morale and (de-)centralization: An experimental study," Public Economics 0511014, EconWPA.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
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