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The Last Refuge of a Scoundrel?

  • Konrad, Kai A.
  • Qari, Salmai

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 University of Munich, Department of Economics in its series Munich Reprints in Economics with number 13960.

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Date of creation: 2012
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Publication status: Published in Economica 315 79(2012): pp. 516-533
Handle: RePEc:lmu:muenar:13960
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  1. Benno Torgler & Friedrich Schneider, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," Working Papers 04-2007, Institute of Local Public Finance.
  2. Benno Torgler, 2003. "Cross Culture Comparision of Tax Morale and Tax Compliance," Working papers 2003/06, Faculty of Business and Economics - University of Basel.
  3. Giorgio Coricelli & Mateus Joffily & Claude Montmarquette & Marie-Claire Villeval, 2007. "Tax Evasion: Cheating Rationally or Deciding Emotionally?," CIRANO Working Papers 2007s-22, CIRANO.
  4. Salmai Qari & Kai Konrad & Benny Geys, 2012. "Patriotism, taxation and international mobility," Public Choice, Springer, vol. 151(3), pages 695-717, June.
  5. Chander, Parkash & Wilde, Louis L, 1998. "A General Characterization of Optimal Income Tax Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 165-83, January.
  6. Frey, Bruno S. & Torgler, Benno, 2006. "Tax Morale and Conditional Cooperation," Berkeley Olin Program in Law & Economics, Working Paper Series qt3rd3f982, Berkeley Olin Program in Law & Economics.
  7. Benno Torgler & Friedrich Schneider, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," CESifo Working Paper Series 1899, CESifo Group Munich.
  8. Qari, Salmai & Konrad, Kai A. & Geys, Benny, 2012. "Patriotism, taxation and international mobility," Munich Reprints in Economics 22071, University of Munich, Department of Economics.
  9. 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.
  10. 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.
  11. 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.
  12. Benno Torgler, 2003. "The Importance of Faith: Tax Morale and Religiosity," CREMA Working Paper Series 2003-08, Center for Research in Economics, Management and the Arts (CREMA).
  13. Macho-Stadler, Ines & Perez-Castrillo, J David, 1997. "Optimal Auditing with Heterogeneous Income," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 951-68, November.
  14. Alm, James & Jacobson, Sarah, 2007. "Using Laboratory Experimentsin Public Economics," National Tax Journal, National Tax Association, vol. 60(1), pages 129-52, March.
  15. Benno Torgler, 2003. "Moral Suasion: An Alternative Tax Policy Strategy?," Working papers 2003/05, Faculty of Business and Economics - University of Basel.
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