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Threats in Latin American and Caribbean countries: How do inequality and the asymmetries of rules affect tax morale?

Mariana Gerstenblüth, Natalia Melgar, Juan Pablo Pagano and Maximo Rossi ()
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Natalia Melgar: Department of Economics, State University, Uruguay
Juan Pablo Pagano: Department of Economics, State University, Uruguay

No 143, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Latin America is well known as the most inequitable region. As it is recognized, inequality and corruption perception weaken the way that political institutions works and the democratic system. Focusing on Latin American and Caribbean countries, we analyze what are the elements that shape tax morale. In particular, we analyze how the context influences on ethic decisions such as the predisposition to pay taxes. Our data source is the survey carried out in 2005 by Latinobarometro. In particular, our objective is to analyze how country performance is determining tax morale. To do so, we estimated four probit models including Gini index, Transparency International Corruption Perception Index and Gross Domestic Product per capita (GDPpc). As expected we found that some socio-demographic variables play a relevant role. Interestingly, we also found that, in this attitude, LAC countries do not register a gender bias. However, those are not our main contributions to the literature on the field. The most important results are linked with: 1) the level matters, GDPpc increases the probability that people have tax morale, 2) moreover, income distribution also influence on tax morale but in opposite direction and 3) corruption perception also reduces tax morale. Those results show that the quality of institutions matters and therefore, the way that democracy works play a relevant role.

Keywords: Tax morale; corruption; inequality; democracy; microeconomic behaviour. (search for similar items in EconPapers)
JEL-codes: H26 H73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam, nep-ltv and nep-pbe
Date: 2009
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Working Paper: Threats in Latin American and Caribbean countries: how do inequality and the asymmetries of rules affect tax morale? (2008) Downloads
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