The Last Refuge of a Scoundrel? Patriotism and Tax Compliance
38 Pages Posted: 7 Apr 2009
There are 3 versions of this paper
The Last Refuge of a Scoundrel? Patriotism and Tax Compliance
The Last Refuge of a Scoundrel? Patriotism and Tax Compliance
Date Written: March 2009
Abstract
We study the effects of patriotism on tax compliance. If individuals feel a (random) patriotic warm glow from honest tax compliance, this has implications for optimal auditing and 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. 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.
Keywords: patriotism, tax evasion, warm glow
JEL Classification: H26, K42
Suggested Citation: Suggested Citation
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