The Last Refuge of a Scoundrel?

Kai Konrad and Salmai Qari

Munich Reprints in Economics from University of Munich, Department of Economics

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 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-iue
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Citations: View citations in EconPapers (59)

Published in Economica 315 79(2012): pp. 516-533

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:13960

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