Salmai Qari

The Last Refuge of a Scoundrel? Patriotism and Tax Compliance

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 governments 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.

Dynamics of Earnings and Hourly Wages in Germany

There is by now a lot of evidence showing a sharp increase in cross-sectional wage and earnings inequality during the 2000s in Germany. Our study is the first to decompose this cross-sectional variance into its permanent and transitory parts for years beyond 2000. Using data from the German Socio-Economic Panel on fulltime working individuals for years of 1994 to 2006, we do not find unambiguous empirical support for the frequent claims that recent increases in inequality have been driven mainly by permanent disparities. From 1994 on, permanent inequality increases continuously, peaks in 2001 but then declines in subsequent years. Interestingly the decline in the permanent fraction of inequality occurs at the time of most rapid increases in cross-sectional inequality. It seems therefore that it is primarily the temporary and not the permanent component which has driven the strong expansion of cross-sectional inequality during the 2000s in Germany.

Gender Differences in Deception Behaviour-The Role of the Counterpart

In a tax compliance experiment with real face-to-face communication between declaring subjects and officers, we analyse the role of both the subject’s and the officer’s gender for deceptive behaviour. We do not find, first, that the amount of underreporting generally depends on the officer’s gender, and second, that the matching of genders plays a role for the deceptive behaviour. Moreover, as a reaction to a high rather than a low penalty, women and men both reduce deceptive behaviour to the same extent and therefore exhibit the same risk-taking attitude.

Compliance with endogenous audit probabilities

This paper studies the effect of endogenous audit probabilities on reporting behavior in a face-to-face compliance situation such as at customs. In an experimental setting in which underreporting has a higher expected payoff than truthful reporting we find an increase in compliance of about 80% if subjects have reason to believe that their behavior towards an officer influences their endogenous audit probability. Higher compliance is driven by considerations about how own appearance and performance affect their audit probability, rather than by social and psychological effects of face-to-face contact.

Power of One-Sample Location Tests Under Distributions with Equal Lévy Distance

In this article, we study the power of one-sample location tests under classical distributions and two supermodels which include the normal distribution as a special case. The distributions of the supermodels are chosen in such a way that they have equal distance to the normal as the logistic, uniform, double exponential, and the Cauchy, respectively. As a measure of distance we use the Lévy metric. The tests considered are two parametric tests, the t-test and a trimmed t-test, and two nonparametric tests, the sign test and the Wilcoxon signed-rank tests. It turns out that the power of the tests, first of all, does not depend on the Lévy distance but on the special chosen supermodel.

Dubious Versus Trustworthy Faces - What Difference Does it Make for Tax Compliance?

ABSTRACT We find experimental evidence that the decision problem of tax compliance changes if subjects’ declarations are not randomly assessed, but is based on their appearance as captured by pictures of their faces, even if the aggregate audit probability does not change. Some subjects may fear that their picture looks rather dubious, whereas others may believe that their picture looks more trustworthy than average. Depending on these beliefs, they may adjust their compliance decisions. Our experimental design allows us to disentangle these potentially countervailing effects.

Gendereffekte bei Risikoneigung und Lügen - Evidenz aus einem Compliance-Experiment

Im Hinblick auf ökonomische Entscheidungen gelten Frauen im Vergleich zu Männern oft als weniger risikofreudig, aber ehrlicher. Der vorliegende Artikel legt die Ergebnisse eines Steuerbefolgungsexperiments (Tax-Compliance) dar, in welchem weder ein signifikanter Unterschied der Risikoneigung noch des Lügenverhaltens nachweisbar waren. Auch scheint es egal zu sein, ob man potenziell gegenüber einer Frau oder einem Mann lügen würde.

Compliance and the Subjective Audit Probability

This paper studies the role of beliefs about how own appearance and performance affect the subjective probability of being audited in a compliance situation, e.g. at customs. In an experiment in which underreporting has a higher expected payoff than truthful reporting we find an increase in compliance of about 80% if subjects have reason to believe that their appearance or performance influences their subjective audit probability. We find that higher compliance is driven by subjective beliefs, rather than by social and psychological effects of personal contact. In contrast, we do not find evidence for individuals who believe that their personal performance can reduce the subjective probability of an audit. Our results suggest that individuals’ beliefs about their subjective audit probability are important. An institutional framework with personal contact and with discretion about whom to audit can therefore improve compliance.