a b s t r a c tThis paper presents empirical evidence that "tax morale" -taxpayers' intrinsic motivation to pay taxes -constitutes a new determinant of happiness, even after controlling for several demographic and socioeconomic factors. Using data on Italian households for 2004, we assess the strength of tax morale by relying on single items as well as composite multiitem indices. Our main result that fiscal honesty generates a higher hedonic payoff than cheating is in line with Harbaugh et al. (2007)'s neuroeconomic finding. Further, it sheds light on the well-known "puzzle of compliance", that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low: tax compliance is less puzzling once we show that not only it is materially costly, but also provides sizeable non-pecuniary benefits that make it rewarding in itself.
In this paper we develop the asymptotic distribution theory for spurious regression between I(1) processes with long-memory stationary errors. Our result departs from the standard results of Phillips (Understanding spurious regression in econometrics. J. Economet. 33 (1986), 311±40) in two respects. First, the limit theory we apply is based on a functional central limit theorem for stationary linear processes whose spectral density at frequency zero may diverge or collapse to zero. Second, different limit distributions may apply depending on the form of long memory exhibited by the error term. We also discuss the extension of our analyis to spurious regression with ®tted intercept.
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