Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 711: Tax Morale and Policy Intervention

Katarina Nordblom ()
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Katarina Nordblom: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden

Abstract: This paper deals with tax morale and how norms may evolve over time. The special focus is on buying black-market services. I apply mechanisms from social psychology to explain how personal norms may evolve due to one's own past behavior through self-signaling and due to conformity based on social interactions. These changes over time result in multiple equilibria, so that the economy can develop stronger social norms and less evasion over time, or weaker norms and more evasion in the long run. An economy on a trajectory toward the “bad” equilibrium may be permanently pushed onto a trajectory toward the “good” equilibrium by means of a suffciently strong temporary policy. Observations from a recent tax reform in Sweden strongly support the theory and suggest that other policies than enforcement may indeed be a powerful tool in inuencing both behavior and attitudes.

Keywords: Social norms; Endogenous norms; Tax evasion; Self-signaling; Normative conformity.

JEL-codes: D91; H26

35 pages, November 2017

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