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Tax morale and (de-)centralization: An experimental study

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  • Werner Güth
  • Vittoria Levati

    ()

  • Rupert Sausgruber

Abstract

We 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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File URL: http://hdl.handle.net/10.1007/s11127-005-3414-7
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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 125 (2005)
Issue (Month): 1 (July)
Pages: 171-188

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Handle: RePEc:kap:pubcho:v:125:y:2005:i:1:p:171-188

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Web page: http://www.springerlink.com/link.asp?id=100332

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Citations

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Cited by:
  1. Traxler, Christian, 2006. "Social Norms and Conditional Cooperative Taxpayers," Discussion Papers in Economics 1202, University of Munich, Department of Economics.
  2. Lars P. Feld & Bruno S. Frey, 2007. "Tax Evasion, Tax Amnesties and the Psychological Tax Contract," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0729, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Stefan Voigt, 2009. "Positive Constitutional Economics II—A Survey of Recent Developments," MAGKS Papers on Economics 200936, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Lars Gläser & Martin Halla, 2006. "Die EU-Zinsenrichtlinie: Ein Schuss in den Ofen?," Economics working papers 2006-14, Department of Economics, Johannes Kepler University Linz, Austria.
  5. Antonio Filippin & Carlo V. Fiorio & Eliana Viviano, 2013. "The effect of tax enforcement on tax morale," Temi di discussione (Economic working papers) 937, Bank of Italy, Economic Research and International Relations Area.
  6. Axel Möhlmann, 2014. "Persistence or Convergence? The East-West Tax-Morale Gap in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(1), pages 3-30, March.
  7. Nichita Ramona-Anca & Batrancea Larissa-Margareta, 2012. "The Implications Of Tax Morale On Tax Compliance Behavior," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 739-744, July.
  8. Werner Güth & M. Vittoria Levati & Matteo Ploner, 2007. "Social identity and trust - An experimental investigation," Papers on Strategic Interaction 2006-41, Max Planck Institute of Economics, Strategic Interaction Group.
  9. Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," IEW - Working Papers 287, Institute for Empirical Research in Economics - University of Zurich.
  10. Rupert Sausgruber & Jean-Robert Tyran, 2013. "Discriminatory Taxes are Unpopular - Even when they are Efficient and Distributionally Fair," Discussion Papers 13-14, University of Copenhagen. Department of Economics.
  11. Guglielmo Barone & Sauro Mocetti, 2009. "Tax morale and public spending inefficiency," Temi di discussione (Economic working papers) 732, Bank of Italy, Economic Research and International Relations Area.
  12. Möhlmann, Axel, 2013. "Investor home bias and sentiment about the country benefiting from the tax revenue," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 31-46.
  13. Werner Güth & Matteo Ploner & Vittoria Levati, . "The Effect of Group Identity in an Investment Game," Papers on Strategic Interaction 2005-06, Max Planck Institute of Economics, Strategic Interaction Group.
  14. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
  15. Bergh, Andreas, 2008. "A critical note on the theory of inequity aversion," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1789-1796, October.

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