Do Taxes Crowd Out Intrinsic Motivation? Field-Experimental Evidence from Germany

58 Pages Posted: 20 Dec 2014

See all articles by Pierre Boyer

Pierre Boyer

Ecole Polytechnique, Palaiseau - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Nadja Dwenger

Max Planck Institute for Tax Law and Public Finance

Johannes Rincke

Ludwig Maximilian University of Munich (LMU); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: December 19, 2014

Abstract

This paper studies how imposing norms on contribution behavior affects individuals' intrinsic motivation. We consider an urban area in Germany where the Catholic Church collects a local church levy as a charitable donation, despite the fact that the levy is legally a tax. In cooperation with the church, we design a natural randomized field experiment with letter treatments informing individuals that the church levy is in fact a tax. Guided by a simple theoretical model, we use baseline contribution behavior to measure individuals' intrinsic motivation and demonstrate that treatment effects differ strongly across motivational types. Among weakly intrinsically motivated individuals, communicating the existence of a legal norm results in a significant crowd-out of intrinsic motivation. In contrast, strongly intrinsically motivated individuals do not show any treatment response. We cross-validate our findings using alternative motivational measures derived from an extensive post-treatment survey.

Keywords: intrinsic motivation, crowding out, charitable giving, taxes, public goods, natural randomized field experiment

JEL Classification: C93, D03, H26, H41

Suggested Citation

Boyer, Pierre C. and Dwenger, Nadja and Rincke, Johannes, Do Taxes Crowd Out Intrinsic Motivation? Field-Experimental Evidence from Germany (December 19, 2014). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014-23, Available at SSRN: https://ssrn.com/abstract=2540539

Pierre C. Boyer

Ecole Polytechnique, Palaiseau - Department of Economics ( email )

Route de Saclay
Palaiseau, 91120
France

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

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nadja Dwenger (Contact Author)

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

10117
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/public_economics/public_economics_people/dwenger_nadja.cfm

Johannes Rincke

Ludwig Maximilian University of Munich (LMU) ( email )

Seminar for Economic Policy
Akademiestr. 1/II
Munich, D-80799
Germany

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

Poschinger Str. 5
Munich, DE-81679
Germany

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