The ghost of institutions past: History as an obstacle to fighting tax evasion?
Christian Koch and
European Economic Review, 2021, vol. 132, issue C
Can a history of evasion affect tax compliance after a major institutional reform? We address this question in a novel laboratory experiment varying the quality of past and present institutions. We find that past institutions continue to exert considerable influence on individuals’ expectations about others’ compliance even after a major, common-knowledge institutional change. Consequently, we observe low compliance in good-quality institutions when there is a history of evasion, but high compliance when there is no such history. These findings suggest that history should not be ignored as it is in traditional models of compliance: the higher evasion has been historically, the stronger incentives may need to be to overcome the “ghost of institutions past”. We show that a society-wide poll in which individuals express their attitudes toward compliance can help break the link with the past.
Keywords: Tax evasion; Interdependence; Multiple equilibria; Path dependence; Experiment (search for similar items in EconPapers)
JEL-codes: C92 H26 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:132:y:2021:i:c:s0014292120302713
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