Tax Morale, Aversion to Ethnic Diversity, and Decentralization

Alessandro Belmonte, Roberto Dell'Anno and Désirée Teobaldelli

No 07/2016, Working Papers from IMT School for Advanced Studies Lucca

Abstract: This paper analyzes the relationship between individuals' aversion to ethnic diversity, the degree of fiscal and political decentralization, and tax morale. Our theory is based on the assumption that individuals are risk averse in contributing to the provision of public goods benefiting other ethnic groups, and threfore display a lower tax morale. We find scope for policy intervention-specifically, our model predicts that the effect of individuals' aversion to ethnic diversity on taxmorale is smaller or null in decentralized political and fiscal systems relative to centralized ones. The theory highlights the role of decentralization reforms to cut down inter-ethnic redistribution in con icting environments. We test our results by using individual data from the World Value Survey, and several decentralization measures from Fan et al. (2009). According to our most preferred estimation, a one-scale change in the attitude toward ethnic diversity reduces tax morale of 0.03 in centralized system. We rather find no impact in decentralized states.

Keywords: Ethnic diversity; Decentralization; Tax morale; Risk-aversion (search for similar items in EconPapers)
JEL-codes: H26 H73 J15 (search for similar items in EconPapers)
Pages: 37
Date: 2016-12, Revised 2016-12
New Economics Papers: this item is included in nep-iue and nep-ure
References: View references in EconPapers View complete reference list from CitEc
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Published in EIC working paper series

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http://eprints.imtlucca.it/3609/1/EIC_WP_7_2016.pdf First version, 2016

Related works:
Journal Article: Tax morale, aversion to ethnic diversity, and decentralization (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ial:wpaper:7/2016

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