Inequitable wages and tax evasion

Linda Dezsö, James Alm, Erico Kirchler

prompted to re-
port their incomes, of which a certain percent is deducted but not redistributed
between them. Next, subjects state their incentivized beliefs about the mean of
the declared-to-true income ratio among their group members. We nd that tax
compliance and beliefs about the prevailing compliance norms are eroded when
wage inequity stems from intentional human choice but not when the same wage
is randomly chosen. Consequently, it is not the wage inequity per se that reduces
tax compliance and corrupts beliefs about the norms, but rather the inequity due
to human choice. Our results demonstrate that incidental unfairness in the form
of intentional wage inequity adversely spills over onto tax compliance and beliefs
about the prevailing compliance norms. In conclusion, intentional wage inequity
can be harmful for the society as a whole.

Vienna Center for Experimental Economics, Department of Occupational, Economic and Social Psychology
External organisation(s)
Tulane University
Publication date
Austrian Fields of Science 2012
502045 Behavioural economics, 501029 Economic psychology, 501002 Applied psychology
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