We experimentally investigated three variants of a real-effort game with taxation that differed in the degree of redistribution of tax revenue. Concretely, we compared a Leviathan scenario, where no tax is redistributed, with a situation where tax revenues are used to finance a public good involving neither a direct nor immediate monetary transfer to participants and with a scenario where direct transfer payments are made to each participant. Our results confirm previous findings of a nonlinear decreasing relationship between tax rate and work effort. We found that, for tax rates above 50 percent, the level of effort was highest under direct redistribution, followed by the public-good scenario, and by the Leviathan case. Conducting the experiment in Canada, France, and Germany, we observed average effort (and thus tax revenues) to be higher in France than in Canada and Germany.
AlmJ.BloomquistK. M.McKeeM.. 2015. “On the External Validity of Laboratory Tax Compliance Experiments.” Economic Inquiry53 (2): 1170–86.
2.
AlmJ.JacobsonS.McKeeM.. 1993. “Fiscal Exchange, Collective Decision Institutions, and Tax Compliance.” Journal of Economic Behavior & Organization22 (4): 285–303.
3.
AlmJ.McClellandG. H.SchulzeW. D.. 1992. “Why Do People Pay Taxes?” Journal of Public Economics48 (1): 21–38.
4.
AlmJ.SanchezI.De JuanD. A.. 1995. “Economic and Non-economic Factors in Tax Compliance by Voting.” Kyklos48:141–71.
5.
AlmJ.TorglerB.. 2006. “Culture Differences and Tax Morale in the United States and Europe.” Journal of Economic Psychology27:224–46.
6.
AshworthJ.UlphD.. 1981. Estimating Labour Supply with Piecewise Linear Budget Constraints. London, UK: Edition Brown.
7.
BlancoM.EngelmannD.NormannH.. 2011. “A Within-subject Analysis of Other-regarding Preferences.” Games and Economic Behavior72 (2): 321–38.
8.
BlomquistS.KumarA.LiangC.-Y.NeweyW. K.. 2015. “Individual Heterogeneity, Nonlinear Budget Sets, and Taxable Income.” CESifo Working Paper Series 5320. Munich, Germany: CESifo Group Munich.
9.
BlundellR.ShephardA.. 2012. “Employment, Hours of Work, and the Optimal Taxation of Low-income Families.” Review of Economic Studies79 (2): 481–510.
10.
BrandtsJ.CharnessG.. 2011. “The Strategy versus the Direct-response Method: The First Survey of Experimental Comparisons.” Experimental Economics14 (3): 375–98.
11.
CadoretI.GalliE.PadovanoF.. 2020. “Environmental Taxation: Pigouvian or Leviathan?” Journal of Industrial and Business Economics. https://doi.org/10.1007/s40812-020-00149-8.
12.
CharnessG.MascletD.VillevalM.-C.. 2013. “The Dark Side of Competition for Status.” Management Science60 (1): 38–55.
13.
ClotfelterC. T. 1983. “Tax Evasion and Tax Rates: An Analysis of Individual Returns.” Review of Economics and Statistics65 (3): 363–73.
14.
CrosonR.2005. “The Method of Experimental Economics.” International Negotiation10:131–48.
15.
CummingR. G.Martinez-VasquezJ.McKeeM.TorglerB.. 2009. “Effects of Culture on Tax Compliance: A Cross-check of Experimental and Survey Evidence.” Journal of Economic Behavior & Organization70 (3): 447–57.
16.
de MezaD.ReyniersD.FessnerL. C.. 2015. “Evidence That Waste Aversion Begets Insurance Aversion.” Economics Letters, Elsevier126 (C): 75–77.
17.
FeldsteinM.1995. “The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act.” Journal of Political Economy103:551–72.
18.
FischbacherU.2007. “z-Tree: Zurich Toolbox for Ready-made Economic Experiments.” Journal of Experimental Economics10 (2): 171–78.
19.
FochmannM.WeimannJ.. 2011. “The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment.” FEMM Working Paper Nr. 20. Magdeburg, Germany: Faculty of Economics and Management, University of Magdeburg.
20.
FreyB.1997. Not Just for the Money-an Economic Theory of Personal Motivation. Cheltenham, UK: Edward Elgar Publishing.
21.
FreyB.FeldL.. 2002. “Deterrence and Morale in Taxation: An Empirical Analysis.” Technical Report CESifo, Working Paper Number 760. Munich, Germany.
22.
FreyB.TorglerB.. 2007. “Tax Morale and Conditional Cooperation.” Journal of Comparative Economics35:136–59.
23.
FukuyamaF.1995. Trust. New York: Free Press.
24.
GamageD.HayashiA.NakamuraB.. 2010. “Experimental Evidence of Tax Framing Effects on the Work/Leisure Decision.” Berkeley Program in Law and Economics, Working Paper Series. Berkeley, CA, USA: University of California.
25.
GoldsbeeA.1999. “Evidence on the High-income Laffer Curve from Six Decades of Tax Reform.” Brookings Papers on Economic Activity2:1–47.
26.
GruberJ.SaezE.. 2002. “The Elasticity of Taxable Income: Evidence and Implications.” Journal of Public Economics84:1–32.
27.
HessingD. J.ElffersH.RobbenH. S. J.WebleyP.. 1992. “Does Deterrence Deter? Measuring the Effect of Deterrence on Tax Compliance in Field Studies and Experimental Studies.” In Why People Pay Taxes: Tax Compliance and Enforcement, edited by SlemrodJ., 291–305. Ann Arbor: University of Michigan Press.
28.
KoenigT.WagenerA.. 2013. “Tax Structure and Government Expenditures with Tax Equity Concerns.” Journal of Economic Behavior & Organization90:137–53.
29.
La PortaR.Lopez-de-SilanesF.ShleiferA.VishnyR. W.. 1997. “Trust in Large Organizations.” American Economic Review87 (2): 333–38.
30.
LazearE. P. 1996. Personnel Economics. Cambridge: MIT Press.
31.
LevittD. S.ListA. J.. 2007. “What Do Laboratory Experiments Measuring Social Reveal about the Real World?” Journal of Economic Perspectives21 (2): 153–74.
32.
Lévy-GarbouaL.MascletD.MontmarquetteC.. 2009. “A Micro-foundation for the Laffer Curve in a Real Effort Experiment.” Journal of Economic Psychology63 (1): 110–25.
33.
NiehuesJ.2014. “Subjective Perceptions of Inequality and Redistributive Preferences: An International Comparison.” Discussion paper. Cologne, Germany: Cologne Institute for Economic Research.
34.
OrtonaG.OttoneS.PonzanoF.ScacciatiF.. 2008. “Labour Supply in the Presence of Taxation Financing Public Services. An Experimental Approach.” Journal of Economic Psychology29 (5): 619–31.
35.
OttoneS.PonzanoF.. 2007. “Laffer Curve in a Non-Leviathan Scenario: A Real-effort Experiment.” Economics Bulletin3 (48): 1–7.
36.
OttoneS.PonzanoF.. 2011. “How People Perceive the Welfare State: A Real-effort Experiment.” International Review of Economics58 (2): 165–83.
37.
SaezE.SlemrodJ.GiertzS. H.. 2012. “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review.” Journal of Economic Literature50 (1): 3–50.
38.
SchneiderF.EnsteD.. 2013. The Shadow Economy: An International Survey, 2nd ed. New York: Cambridge University Press.
39.
SeltenR.1967. “Die Strategiemethode zur Erforschung des eingeschraünkt rationalen Verhaltens im Rahmen eines Oligopolexperiments.” In Beitraüge zur experimentellen Wirtschaftsforschung,
edited by SauermannHeinz, 136–68. Tuübingen: J.C.B. Mohr (Paul Siebeck).
40.
SillamaaM. A. 1999a. “How Work Effort Responds to Wage Taxation: A Non-linear versus a Linear Tax Experiment.” Journal of Economic Behavior and Organization39:219–33.
41.
SillamaaM. A. 1999b. “Taxpayer Behavior in Response to Taxation: Comment and New Experimental Evidence.” Journal of Accounting and Public Policy18:165–77.
42.
SillamaaM. A.VeallM.. 2000. “The Effects of Marginal Tax Rates on Taxable Income: A Panel Study of the 1988 Tax Flattening in Canada.” Journal of Public Economics80: 341–356.
43.
SkinnerJ.SlemrodJ.. 1985. “An Economic Perspective on Tax Evasion.” National Tax Journal3:345–53.
44.
SutterM.Weck-HannemannH.. 2003. “Taxation and the Veil of Ignorance: A Real-effort Experiment on the Laffer Curve.” Public Choice115:217–40.
45.
SwensonC.1988. “Taxpayer Behavior in Response to Taxation: An Experimental Analysis.” Journal of Accounting and Public Policy7:1–28.
46.
TorglerB.2003. “Tax Morale and Institutions.” Working Paper No. 2003–09. University of Basel, Switzerland: Center for Research in Economics, Management and the Arts.
47.
TorglerB.SchneiderF.. 2007. “What Shapes Attitudes toward Paying Taxes? Evidence from Multicultural European Countries.” Social Science Quarterly88 (2): 443–70.
48.
WillingerM.KeserC.LohmannC.UsunierJ.-C.. 2003. “A Comparison of Trust and Reciprocity between France and Germany: Experimental Investigation Based on the Investment Game.” Journal of Economic Psychology24 (4): 447–66.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
