Tax Morale Luttmer, Erzo F. P.; Singhal, Monica
The Journal of economic perspectives,
10/2014, Letnik:
28, Številka:
4
Journal Article
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There is an apparent disconnect between much of the academic literature on tax compliance and the administration of tax policy. In the benchmark economic model, the key policy parameters affecting ...tax evasion are the tax rate, the detection probability, and the penalty imposed conditional on the evasion being detected. Meanwhile, tax administrators also tend to place a great deal of emphasis on the importance of improving “tax morale,” by which they generally mean increasing voluntary compliance with tax laws and creating a social norm of compliance. We will define tax morale broadly to include nonpecuniary motivations for tax compliance as well as factors that fall outside the standard, expected utility framework. Tax morale does indeed appear to be an important component of compliance decisions. We demonstrate that tax morale operates through a variety of underlying mechanisms, drawing on evidence from laboratory studies, natural experiments, and an emerging literature employing randomized field experiments. We consider the implications for tax policy and attempt to understand why recent interventions designed to improve morale, and thereby compliance, have had mixed results to date.
This paper examines the performance of new online lending markets that rely on nonexpert individuals to screen their peers’ creditworthiness. We find that these peer lenders predict an individual’s ...likelihood of defaulting on a loan with 45% greater accuracy than the borrower’s exact credit score (unobserved by the lenders, who only see a credit category). Moreover, peer lenders achieve 87% of the predictive power of an econometrician who observes all standard financial information about borrowers. Screening through soft or nonstandard information is relatively more important when evaluating lower-quality borrowers. Our results highlight how aggregating over the views of peers and leveraging nonstandard information can enhance lending efficiency.
This paper was accepted by Amit Seru, finance.
We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from ...data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study's panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. Across a wide range of alternative specifications and assumptions, we find that the marginal utility of consumption declines as health deteriorates, and we are able to clearly reject the null of no state dependence. Our point estimates indicate that a one-standard-deviation increase in the number of chronic diseases is associated with a 10%—25% decline in the marginal utility of consumption relative to this marginal utility when the individual has no chronic diseases. We present some simple, illustrative calibration results that suggest that state dependence of the magnitude we estimate can have a substantial effect on important economic problems such as the optimal level of health insurance benefits and the optimal level of life-cycle savings.
This paper investigates whether individuals feel worse off when others around them earn more. In other words, do people care about relative position, and does "lagging behind the Joneses" diminish ...well-being? To answer this question, I match individual-level data containing various indicators of well-being to information about local average earnings. I find that, controlling for an individual's own income, higher earnings of neighbors are associated with lower levels of self-reported happiness. The data's panel nature and rich set of measures of well-being and behavior indicate that this association is not driven by selection or by changes in the way people define happiness. There is suggestive evidence that the negative effect of increases in neighbors' earnings on own well-being is most likely caused by interpersonal preferences, that is, people having utility functions that depend on relative consumption in addition to absolute consumption.
Is culture an important determinant of preferences for redistribution ? To separate culture from the economic and institutional environment ("context"), we relate immigrants' redistributive ...preferences to the average preference in their birth countries. We find a strong positive relationship that is robust to rich controls for economic factors and cannot easily be explained by selective migration. This effect is as large as that of own household income and appears stronger for those less assimilated into the destination country. Immigrants from high-preference countries are more likely to vote for more proredistribution parties. The effect of culture persists strongly into the second generation.
We develop frameworks for welfare analysis of Medicaid and apply them to the Oregon Health Insurance Experiment. Across different approaches, we estimate low-income uninsured adults’ willingness to ...pay for Medicaid between $0.5 and $1.2 per dollar of the resource cost of providing Medicaid; estimates of the expected transfer Medicaid provides to recipients are relatively stable across approaches, but estimates of its additional value from risk protection are more variable. We also estimate that the resource cost of providing Medicaid to an additional recipient is only 40 percent of Medicaid’s total cost; 60 percent of Medicaid spending is a transfer to providers of uncompensated care for the low-income uninsured.
We present a dictator game experiment where the recipients are local charities that serve the poor. Donors consist of approximately 1000 participants from a nationally representative sample. We ...manipulate the perceived worthiness and race of the charities' recipients with an audiovisual presentation. Respondents then decide how much to give to the charities and report their perceptions of recipient worthiness and racial composition. We have four main findings. First, treatments describing recipients as worthy significantly increase giving. Second, the treatment where respondents viewed photos mostly of the black recipients rather than white recipients had no significant effect on giving, even though it successfully manipulated perceptions of racial composition. Third, we find significant racial bias in perceptions of worthiness; the black picture treatment lowers perceived recipient worthiness significantly more among non-black respondents than among black respondents. Finally, we decompose the reduced-form effect of the black picture treatment on giving into two channels: one operating via perceptions of recipient worthiness and one running through perceptions of recipient racial composition. The worthiness perceptions channel is statistically significant, while the race perceptions channel is not. Thus, racially biased worthiness perceptions have a significant effect on giving but this effect is not strong enough to cause a significant reduced-form effect of the black picture treatment on giving.
Policy uncertainty reduces individual welfare when individuals have limited opportunities to mitigate or insure against the resulting consumption fluctuations. We field an original survey to measure ...the degree of perceived policy uncertainty in Social Security benefits and to estimate the impact of this uncertainty on individual welfare. Our central estimates show that on average individuals are willing to forgo 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future Social Security benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits.
Interpersonal preferences—preferences that depend on the characteristics of others—are typically hard to infer from observable individual behavior. As an alternative approach, this paper uses survey ...data to investigate interpersonal preferences. I show that self‐reported attitudes toward welfare spending are determined not only by financial self‐interest but also by interpersonal preferences. These interpersonal preferences are characterized by a negative exposure effect—individuals decrease their support for welfare as the welfare recipiency rate in their community rises—and racial group loyalty—individuals increase their support for welfare spending as the share of local recipients from their own racial group rises. These findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states.
This paper presents the results of a randomized field experiment that provided information about key Social Security features to older workers. The experiment was designed to examine whether it is ...possible to affect individual behavior using a relatively inexpensive informational intervention about the provisions of a public program and to explore the mechanisms underlying the behavior change. We find that our relatively mild intervention (sending an informational brochure and an invitation to a web-tutorial) increased labor force participation one year later by 4 percentage points relative to the control group mean of 74 percent.
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