April 2010

IZA DP No. 4918: Tax Morale and Compliance Behavior: First Evidence on a Causal Link

revised version published in: B.E. Journal of Economic Analysis & Policy, 2012, 12 (1), 1-27

Recent literature on tax evasion emphasizes the importance of moral considerations to explain compliance behavior. As a consequence scholars aim to identify factors that shape this so-called tax morale. However, the causal link between tax morale and actual compliance behavior is not established yet. Exploiting exogenous variation in tax morale – given by the inherited part of tax morale of American-born from their ancestors' country of origin – our instrumental variable analysis provides first evidence on a causal effect of tax morale on the size of the underground production.