Abstract
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.
Item Type: | Paper |
---|---|
Keywords: | patriotism; tax evasion; warm glow |
Faculties: | Economics > Chairs > MPI for Tax Law and Public Finance |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | H26, K42 |
Place of Publication: | Berlin |
Language: | English |
Item ID: | 24390 |
Date Deposited: | 27. Mar 2015, 13:16 |
Last Modified: | 03. Mar 2017, 10:54 |