Testing Enforcement Strategies in the Field: Legal Threat, Moral Appeal and Social Information

Abstract

We run a large-scale natural field experiment to evaluate alternative strategies to enforce compliance with the law. The experiment varies the text of mailings sent to potential evaders of TV license fees. We find a strong alert effect of mailings, leading to a substantial increase in compliance. Among different mailing conditions a legal threat that stresses a high detection risk has a significant and highly robust deterrent effect. Neither appealing to morals nor imparting information about others' behavior enhances compliance. However, the information condition has a positive effect in municipalities where evasion is believed to be common. Overall, the economic model of crime performs remarkably well in explaining our data.JEL classification: K42; C93

From the Lab to the Field: A Review of Tax Experiments

“…In addition, more nuanced results can be shown in studies that analyse sub-groups separately. The absence of any e↵ect at the aggregate level may hide heterogeneous responses across groups (Fellner et al, 2013). Despite these di↵erences across individual studies, this literature points to a few common results on what matters for compliance.…”

“…The latter have a few important advantages over the former: they are fully embedded in real taxpaying situations, thus being more suitable as a basis for policy advice; they benefit from more statistical power as samples are much larger than what the lab previously allowed; and they provide further insights into the heterogeneity of taxpayers' responses to various determinants of compliance. While it is clear that deterrence messages a↵ect particularly taxpayers with self-reported income Kleven et al, 2011), other factors such as the level of compliance in the community (Fellner et al, 2013), existing beliefs on enforcement and compliance (Del Carpio, 2013;Carrillo et al, 2014), and taxpayers' motivations to comply (Dwenger et al, 2014) all matter to explain the results. With field experiments, this literature is moving away from purely theoretical hypotheses to more practical policy questions, around enforcement constraints and third party reports.…”

“…This has proven particularly important as indeed the control letter has been found to be responsible for a large portion of the results in some cases (Fellner et al, 2013). …”

“…• Compliance is defined in various ways: in terms of outstanding payments (Hallsworth et al, 2014), as new registrations (Fellner et al, 2013), or as increases in reported income ).…”

“…They generally find deterrence to be e↵ective (Fellner et al, 2013;Ariel, 2012;Bott et al, 2014;Dwenger et al, 2014;Cummings et al, 2009). Since the main results are related to the other factors explored, they are reviewed in other sections.…”