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Cheating, Emotions, and Rationality: An Experiment on Tax Evasion

  • Giorgio Coricelli

    (ISC - Institut des Sciences Cognitives - CNRS - UCBL - Université Claude Bernard Lyon 1)

  • Mateus Joffily

    (ISC - Institut des Sciences Cognitives - CNRS - UCBL - Université Claude Bernard Lyon 1)

  • Claude Montmarquette

    (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal)

  • Marie Claire Villeval

    ()

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)

The economics-of-crime approach usually ignores the emotional cost and benefit of cheating. In this paper, we investigate the relationships between emotions, deception, and rational decision-making by means of an experiment on tax evasion. Emotions are measured by skin conductance responses and self-reports. We show that the intensity of anticipated and anticipatory emotions before reporting positively correlates with both the decision to cheat and the proportion of evaded income. The experienced emotional arousal after an audit increases with the monetary sanctions and the arousal is even stronger when the evader's picture is publicly displayed. We also find that the risk of a public exposure of deception deters evasion whereas the amount of fines encourages evasion. These results suggest that an audit policy that strengthens the emotional dimension of cheating favors compliance.

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Paper provided by HAL in its series Post-Print with number halshs-00462067.

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Date of creation: 2010
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Publication status: Published in Experimental Economics, Springer Verlag (Germany), 2010, 13 (2), pp.226-247. <10.1007/s10683-010-9237-5>
Handle: RePEc:hal:journl:halshs-00462067
DOI: 10.1007/s10683-010-9237-5
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00462067
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  10. Dhami, Sanjit & al-Nowaihi, Ali, 2007. "Why do people pay taxes? Prospect theory versus expected utility theory," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 171-192, September.
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  18. Timothy N. Cason & Lata Gangadharan, 2006. "An Experimental Study of Compliance and Leverage in Auditing and Regulatory Enforcement," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 352-366, April.
  19. Charness, Gary & Gneezy, Uri, 2003. "Portfolio Choice and Risk Attitudes: An Experiment," University of California at Santa Barbara, Economics Working Paper Series qt7vz7w609, Department of Economics, UC Santa Barbara.
  20. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
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  22. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
  23. Myles, Gareth D. & Naylor, Robin A., 1996. "A model of tax evasion with group conformity and social customs," European Journal of Political Economy, Elsevier, vol. 12(1), pages 49-66, April.
  24. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  25. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, June.
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