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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
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Handle: RePEc:iza:izadps:dp4121
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