The ghost of institutions past: History as an obstacle to fighting tax evasion?

Christian Koch, Aaron Kamm, Nikos Nikiforakis

Publications: Contribution to journalArticlePeer Reviewed

Abstract

Can a history of evasion affect tax compliance after a major institutional reform? We address this question in a novel laboratory experiment varying the quality of past and present institutions. We find that past institutions continue to exert considerable influence on individuals’ expectations about others’ compliance even after a major, common-knowledge institutional change. Consequently, we observe low compliance in good-quality institutions when there is a history of evasion, but high compliance when there is no such history. These findings suggest that history should not be ignored as it is in traditional models of compliance: the higher evasion has been historically, the stronger incentives may need to be to overcome the “ghost of institutions past”. We show that a society-wide poll in which individuals express their attitudes toward compliance can help break the link with the past.
Original languageEnglish
Article number103641
Number of pages17
JournalEuropean Economic Review
Volume132
DOIs
Publication statusPublished - Feb 2021

Austrian Fields of Science 2012

  • 502045 Behavioural economics

Keywords

  • CMI
  • Cat2
  • Experiment
  • Tax evasion
  • Interdependence
  • Multiple equilibria
  • Path dependence

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