Testing the Mill Hypothesis of Fiscal Illusion

Sausgruber, Rupert; Tyran, Jean‐Robert

doi:10.2139/ssrn.699962

Cited by 64 publications

(71 citation statements)

References 27 publications

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“…A standard explanation for this result is impure altruism, that is, people draw additional utility from the very act of giving ("warm glow of giving", Andreoni, 1989). In contrast to other authors (Sausgruber and Tyran, 2005;Eckel et al, 2005), we did not find evidence of the fiscal illusion, that is, differences in the perception of indirect and direct taxes.…”

Section: Resultscontrasting

confidence: 92%

An Experimental Study on the Gap between Willingness to Pay and Willingness to Donate for Green Electricity

Menges¹,

Traub²

2009

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Abstract.According to Champ et al. (1997), we have to differentiate between willingness to pay (WTP) and willingness to donate (WTD) in eliciting individual preferences for public goods. Because strong incentives exist to understate the willingness to spend on the public good and to freeride on other people's contributions, WTP forms the upper limit for WTD. This paper presents an experimental study on the size of the gap between WTP and WTD in the context of green electricity promotion, where making electricity markets ''greener'' can be interpreted contributing to the public good "environmental quality". Our theoretical model is based on the impure public good model Sandler, 1984, 1994). It enables us to directly investigate the extent of free-riding in the sample. In the individual-choice scenario, subjects are induced to act as market participants and thereby reveal their WTP, while the public-choice scenario is designed as a majority vote on the preferred level of green electricity. Since free-riding is impossible, the latter treatment reveals subjects' WTD. The data analysis reveals a strong treatment effect concerning the decision mode: under the public choice treatments, participants were willing to pay about three times higher contributions to green electricity than under the individual choice treatments. This observation highlights the large extent of free-riding in the private provision of the public good "environmental quality".

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Section: Resultscontrasting

confidence: 92%

An Experimental Study on the Gap between Willingness to Pay and Willingness to Donate for Green Electricity

Menges¹,

Traub²

2009

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“…This view is supported by recent empirical evidence gathered via field and lab experiments which finds that taxes are perceived only imperfectly and that "salience" as well as context are important determinants of individuals' responses to tax changes (Sausgruber and Tyran 2005;Finkelstein 2009;Chetty et al 2009;Blumkin et al 2012). Additionally, our subjects have to take an explicit action, underreporting, in order to benefit from a lower tax burden.…”

Section: Evasion Vs Net Wage and Effective Tax Ratesupporting

confidence: 65%

Experimental evidence on the relationship between tax evasion opportunities and labor supply

Doerrenberg¹,

Duncan²

2014

European Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Motivated by the observation that access to evasion opportunities is distributed heterogeneously across the labor market, this paper examines the extent to which labor supply elasticities with respect to tax rates depend on such evasion opportunities. We first set up a theoretical model to formally show that labor supply responses depend on access to evasion. The model is then tested in a lab experiment in which all participants undertake a real-effort task over several rounds. Subjects face a tax rate, which varies across rounds and are required to pay taxes on earned income. The treatment group is given the opportunity to underreport income while the control group is not. We find zero labor effort responses to tax rates in the control group and positive statistically significant adjustments in the treatment group; suggesting that both groups indeed react differently to taxes. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E S

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“…Field results on tax salience demonstrate that individuals respond less to a tax when the tax is less explicit Finkelstein, 2009;Cabral and Hoxby, 2012;Jones, 2012). Recent laboratory research has supported the claim that individuals respond more to taxes that are more salient (e.g., Sausgruber and Tyran, 2005;Blumkin et al, 2012), and increases in income taxes are often less salient than equivalent decreases in wages. found that laboratory workers who were paid the same net wage worked harder and longer when they faced higher gross wages and higher tax rates: a result they called "net wage illusion" since workers behaved as though their net wage was higher because their gross wage was higher.…”

Section: Introductionmentioning

confidence: 99%