March 2, 2010, 11:00–12:30
Toulouse
Room MF 323
Economic Theory Seminar
Abstract
We study the effects of individual patriotic warm glow on tax compliance. A higher expected warm glow reduces the government’s optimal audit probability and yields higher tax compliance. Also, individuals with higher warm glow are less likely to evade taxes. We confirm the predictions on the individual level employing survey data on attitudes toward tax compliance. 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. Keywords: patriotism, tax evasion, warm glow
JEL codes
- H26: Tax Evasion
- K42: Illegal Behavior and the Enforcement of Law