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Economic Crisis and Morale

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  • Friedrich Heinemann

Abstract

The functioning of welfare states and tax systems is fostered by social norms to obey the rules of the system. Morale can change and react to new incentives. In particular, a deep economic crisis with increasing unemployment and reduced prospects for market income may have a norm eroding effect. This study explores the link between economic crisis and morale. Our theoretical reasoning is based on an economic approach to the evolution of norms, according to which norms are influenced by self-interest. A distinction is made between two dimensions of citizens’ morale: benefit and tax morale. Our econometric evidence based on data from the World Value Survey suggests that a sharp hike in unemployment reduces the morale standards along both dimensions. The crisis impact on benefit morale is conditional on the existence of generous benefit schemes.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 09-046.RS.

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Length: 18 p.
Date of creation: 2009
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Handle: RePEc:sol:wpaper:09-046

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Keywords: Social norms; tax morale; benefit morale;

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Cited by:
  1. 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.
  2. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.

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