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The Last Refuge of a Scoundrel? Patriotism and Tax Compliance

  • Konrad, Kai A.


    (Max Planck Institute for Tax Law and Public Finance)

  • Qari, Salmai


    (WZB - Social Science Research Center Berlin)

We study the effects of patriotism on tax compliance. In particular, we assume that individuals feel a (random draw of) warm glow from honestly paying their taxes. A higher expected warm glow reduces the government's optimal audit probability and yields higher tax compliance. Second, individuals with higher warm glow are less likely to evade taxes. This prediction is confirmed empirically by a multivariate analysis on the individual level while controlling for several other potentially confounding factors. The findings survive a variety of robustness checks, including an instrumental variables estimation to tackle the possible endogeneity of patriotism. On the aggregate level, we provide evidence for a negative correlation between average patriotic warm glow and the size of the shadow economy across several countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4121.

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Length: 37 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4121
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  1. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, June.
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  3. Crumpler, Heidi & Grossman, Philip J., 2008. "An experimental test of warm glow giving," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1011-1021, June.
  4. Benno Torgler & Friedrich Schneider, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," CESifo Working Paper Series 1923, CESifo Group Munich.
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  6. Torgler, Benno, 2006. "The importance of faith: Tax morale and religiosity," Journal of Economic Behavior & Organization, Elsevier, vol. 61(1), pages 81-109, September.
  7. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  8. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
  9. Frey, Bruno S. & Torgler, Benno, 2007. "Tax morale and conditional cooperation," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 136-159, March.
  10. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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  12. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  13. Gordon, James P. P., 1989. "Individual morality and reputation costs as deterrents to tax evasion," European Economic Review, Elsevier, vol. 33(4), pages 797-805, April.
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  17. Torgler, Benno & Schneider, Friedrich, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," IZA Discussion Papers 2541, Institute for the Study of Labor (IZA).
  18. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
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  21. Coricelli, Giorgio & Joffily, Mateus & Montmarquette, Claude & Villeval, Marie Claire, 2007. "Tax Evasion: Cheating Rationally or Deciding Emotionally?," IZA Discussion Papers 3103, Institute for the Study of Labor (IZA).
  22. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  23. O'Rourke, Kevin H. & Sinnott, Richard, 2006. "The determinants of individual attitudes towards immigration," European Journal of Political Economy, Elsevier, vol. 22(4), pages 838-861, December.
  24. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
  25. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages F370-80, June.
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