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The Last Refuge of a Scoundrel? Patriotism and Tax Compliance

38 Pages Posted: 26 Aug 2010  

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Salmai Qari

WZB Berlin Social Science Center; Max Planck Institute for Tax Law and Public Finance

Multiple version iconThere are 4 versions of this paper

Date Written: March 1, 2009

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.

Keywords: patriotism, tax evasion, warm glow

JEL Classification: H26, K42

Suggested Citation

Konrad, Kai A. and Qari, Salmai, The Last Refuge of a Scoundrel? Patriotism and Tax Compliance (March 1, 2009). Available at SSRN: https://ssrn.com/abstract=1664986 or http://dx.doi.org/10.2139/ssrn.1664986

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Social Science Research Center Berlin (WZB) ( email )

Reichpietschufer 50
Berlin, 10785
Germany

HOME PAGE: http://www.wzb.eu/mp/fff/people/kai_konrad.en.htm

Centre for Economic Policy Research (CEPR)

90-98 Goswell Road
London, EC1V 7RR
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, 81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

Salmai Qari

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

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