Tax Morale After the Reunification of Germany: Results from a Quasi-Natural Experiment

41 Pages Posted: 27 Feb 2007

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Benno Torgler

Yale University - Yale Center for International and Area Studies

Date Written: February 2007

Abstract

This paper provides a comparison of tax morale between inhabitants of East and West Germany in its post-reunification period, using three World Values Survey/European Values Survey waves between 1990 and 1999. German reunification is particularly interesting for the analysis of tax morale as it is close to a natural experiment. Many factors can be controlled because they are similar, as, e.g., a common language, similar education systems and a shared cultural and political history prior to the separation after the Second World War. As a consequence, an East-West comparison has a methodological advantage compared to cross-country studies. Our findings show higher tax morale in East than in West Germany. However, in only 9 years after reunification, tax morale values strongly converged, especially due to a strong change in the level of tax morale in the East. We suggest that this convergence in tax morale between East and West Germany, despite efforts of the federal government to increase deterrence, indicates that tax morale is more strongly driven by other factors than deterrence.

Keywords: tax morale, tax evasion, deterrence, quasi-natural experiment

JEL Classification: H26, H73, D78, C93

Suggested Citation

Feld, Lars P. and Torgler, Benno, Tax Morale After the Reunification of Germany: Results from a Quasi-Natural Experiment (February 2007). CESifo Working Paper No. 1921, Available at SSRN: https://ssrn.com/abstract=965414 or http://dx.doi.org/10.2139/ssrn.965414

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Benno Torgler

Yale University - Yale Center for International and Area Studies ( email )

P.O. Box 208206
New Haven, CT 06520-8206
United States

HOME PAGE: http://www.crema-research.ch/fellowseiten/torgler.htm

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