Willing to Pay? Testing Institutionalist Theories with Experiments

G. Andrighetto, S. Ottone, F. Ponzano, N. Zhang and S. Steinmo

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• Traditional economic theory suggests:– Institutional rules.– Incentives and disincentives.

• Tax Rates• Audit rates and punishment regimes.

• Additional Variables/Factors?– Norms?– Attitudes towards the state?– Belief in fairness (or unfairness) of system?– Sense of personal integrity or identity?– Values?

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The aim of the project:

Why do people comply - or not?

• In real world people in different countries face different fiscal systems. In the laboratory we can use the same system to see different population groups behave differently.

• IF we find variation with constant institutions (we do) then we can begin to manipulate the context and/or rules (instruments’) to hopefully uncover what explains these variations.

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Why an experimental investigation?

1. Tax Compliance Experiment:

1. A real effort experiment – clerical task

2. Three stages where we elicit tax compliance under

different conditions.

2. Social Value Orientation (SVO) exercise 3. Questionnaire (basic questions drawn from

International Public Opinion Surveys).

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The Basic Design:Three Separate Units

• There are significant difference in compliance across locations.

• Tax rates effect behavior less than redistributive regime.

• Social Value Orientation matters.• The influence of attitudes on behavior is not clear• Some additional results: – Gender– Risk tolerance – Income

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Some Preliminary Results:

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Most people comply and

Institutions Matter

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Brits cheat more that Italians! (?)

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Round 1Compliance by location

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Round 2 -Tax rates have small

effects

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Round 3Progressive Taxes and

Charity

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Unit II: Values?

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The Social Value IndexPick a point on the scale

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SVO – example 2

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Unit III:Political Attitudes?

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Attitudes towards

redistribution and compliance

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Some additional and unexpected findings:

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Gender

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Men – more selfish everywhere?

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Total Evaders by gender and location

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Are the Rich Greedy?

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High Earners Comply at Lower Rates

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Risk

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“Risk takers” are less compliant

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Further research

• Run the baseline experiment in more countries, in different regions in each country, and with more diverse population samples.

• Test for:– Norms elicitation– Effects of diversity– Efficiency– Different institutional rules (eg. Voting)– Complexity– Different redistributive regimes.

• Suggestions … ?

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DO NOT STEAL !The State Does not

Tolerate the Competition

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Re-ordering the treatments

NoPot Pot DoublePot Tax10 Tax30 Tax50 Prog1 Prog2 UNICEF0

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Round

Tax

com

plia

nce

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SwedenAll three experiments

(327)

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Some non-findings:

• Attitudes and behavior

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