Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2011:13: Endogenous Norm Formation Over the Life Cycle – The Case of Tax Evasion

Katarina Nordblom () and Jovan Zamac ()
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Katarina Nordblom: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Jovan Zamac: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper offers an explanation to why the general observation that elderly hold stronger moral attitudes than young ones may be an age rather than a cohort effect. We apply mechanisms from social psychology to explain how personal norms may evolve over the life cycle. We assume that people update their norms influenced by their own past behavior (e.g., cognitive dissonance) and/or by the attitudes of their peers (normative conformity). We apply the theory on actual norm distributions for young and old concerning tax evasion. Allowing for heterogeneous updating of norms where only those who identify with their network are actually conforming with it, while the others are only influenced by their own past behavior, we can explain the difference between young and old people’s moral values as an age effect through endogenous norm formation.

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

JEL-codes: D03; H26

29 pages, June 30, 2011

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