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We study what induces delinquent taxpayers to pay their taxes due. We use high quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by roughly 10 percentage points. When including actual enforcement, payment increases by around 20 percentage points compared to those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those of much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a “pure nudge”, i.e., the inclusion of an extra piece of paper with no valuable information, has an effect of 7-8 percentage points for those who do not risk enforcement upon non-payment. However, the same nudge has no detectable effect for the group at risk of enforcement. Social-norm messages in turn increase payments both for those who risk enforcement and for those who do not, but to a much smaller degree. We also find that a pure nudge works much better for those who receive a physical letter than for those who receive information electronically, while the reaction to the social-norm nudge is significant for those who get the electronic information. JEL Codes: C21, D03, D91, H24, H26

In this paper we develop a theoretical model to clarify the underlying mechanisms that drive individual decision making and responses to behavioral interventions, such as nudges. The contribution of the paper is three-fold: First, the model provides a theoretical framework that comprehensively structures the individual decision-making process applicable to a wide range of choice situations. Second, we reduce the confusion regarding what should be called a nudge by offering a clear classification of behavioral interventions. We distinguish among what we label as pure nudges, preference nudges, and other behavioral interventions. Third, we identify the mechanisms behind the effectiveness of behavioral interventions based on the structured decision-making process. Hence, the model can be used to predict under which circumstances, and in which choice situations, a nudge is likely to be effective. JEL: D11, D91.

How do moral concerns affect tax compliance and the need for audits? We propose answers by exploring an inspection game, modified to incorporate belief-dependent taxpayer guilt, unawareness, and third-party audience effects. Novel conclusions are drawn regarding whose behavior is affected by moral concerns (it's the authority's more than the citizen's) and regarding policy, in particular fines vs. jail, the role of information campaigns, and the use of a principle of public access whereby tax returns are made public information. Jel-codes D03; H26;H83

We study what determines taxpayers' deduction behavior when filing tax returns. Preliminary deficits might be viewed as losses assuming zero preliminary balance as reference point. Swedish taxpayers may escape these losses by claiming deductions after receiving information about the preliminary balance. Furthermore, the Swedish income tax system has a substantial kink (20 percentage points) where the central government tax applies. Taxpayers slightly above the governmental tax kink have substantially higher (standard economic) incentives to claim deductions than taxpayers slightly below the kink. Using a regression kink and discontinuity approach with individual fixed effects, we study a panel of 4.1 million Swedish taxpayers in 1999 to 2006. We find strong causal effects of preliminary deficits on the probability of claiming deductions. The initial empirical evidence for a kink in deduction probability at the central government threshold, anticipated by standard economic theory, is weaker but significant. However, a more detailed analysis reveals that the kink at the tax threshold is not likely due to the tax incentives per se. When controlling for the preliminary tax deficit, the kink at the tax threshold disappears. Taxpayers just above the tax kink are namely more likely to run a preliminary tax deficit than those just below it. Hence, the most plausible explanation also for the kink at the tax threshold is therefore loss aversion and not standard economic incentives. The Swedish taxpayers are thus "misbehaving", in a Thaler (2015) sense, on two separate margins: they are highly loss averse but surprisingly inattentive to standard monetary incentives.

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. JEL: D91; H26

We analyze the importance of legitimacy and compare how drivers of public policy attitudes evolve across the policy process consisting of the input (i.e. the processes forgoing acquisition of power and the procedures permeating political decision-making), throughput (i.e. the inclusion of and interactions between actors in a governance-system) and output (i.e. the substantive consequences of those decisions) stages. Using unique panel data through the three phases of the congestion tax in the Swedish city of Gothenburg, we find that legitimacy is indeed important in explaining policy support. Moreover, we find a lingering effect where support in one phase depends on legitimacy both in the present and in previous phases. Hence, our study takes us one step further on the road to understand the complicated dynamic mechanisms behind the interactions between policy making, policy support and the legitimacy and approval of politicians and political processes. JEL: H11, H23, Z18

The objective of this paper is to study if taxpayers behave in a loss averse manner when filing their tax returns. This is important for tax design but also for understanding human behavior in general. The predictions of prospect theory can be contrasted to those of expected utility theory. We use data for 3.6 million Swedish taxpayers for the income year 2006. Our research method is quasi-experimental using a regression kink and discontinuity approach. We also use an alternative instrumental-variables approach. There is strong evidence of loss aversion. We estimate the coefficient of loss aversion using actual behavior and the instrument-variables approach. Our estimate is very close to the estimates reported in the experimental literature.

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.

We examine social preferences of Swedish and Austrian children and adolescents using the experimental design of Charness and Rabin (2002). We find that difference aversion decreases while social-welfare preferences increase with age.

This paper reports from a simple natural field experiment based on an eco-nomics exam. Part of the exam consisted of 30 multiple choice questions, where the students obtained 1 point per correct answer while 1 point was deducted for each in-correct answer. We find no significant gender differences in overconfidence, irrespec-tive of how we measure it, i.e., whether we regard the number of questions answered, the number of questions answered incorrectly or the answering patterns for the most difficult questions. Hence, the data provides no support for the frequently proposed hypothesis that men are more overconfident than women.

Social preferences have been shown to be an important determinant of economic decision making for many adults. We present a large-scale experiment with 883 children and adolescents, aged eight to seventeen years. Participants make decisions in eight simple, one-shot allocation tasks, allowing us to study the distribution of social preference types across age and across gender. Our results show that when children and teenagers grow older, inequality aversion becomes a gradually less prominent motivating force of allocation decisions. At the same time, efficiency concerns increase in importance for boys, and maximin-preferences turn more important in shaping decisions of girls.

We analyze the impacts of birth order and presence/absence of siblings on risk preferences with respect to economic, health/safety, and sport/lifestyle related risks. We study both the answer to a hypothetical lottery question and stated risky behavior and find that middle-borns are consistently less risk averse than others irrespective of the type of risk. Moreover, the answer to the lottery question is strongly correlated with economic and sport/lifestyle related risky behavior.

We study how gender, birth order, and number of siblings are related to stated time and risk preferences and to real-life decisions. We use survey data covering about 2,300 individuals and find that time and risk preferences are significantly correlated among women but not among men. We also find that stated time and risk preferences have clear explanatory power for real-life decisions, but in different ways for men and women. Moreover, risk preferences have stronger explanatory power for males than for females, whose decisions are more related to birth order and number of siblings. For example, the often claimed result that first-borns are more likely to have higher education is found among women only, while risk aversion and patience can explain part of men´s corresponding choice.

Number of siblings has previously been found to adversely affect earned income. However, we still lack understanding of whether nature or nurture drives this effect. We examine in detail the effects of having different kinds of siblings and find that the number of siblings one grew up with has a strong negative effect on earnings, while the total number of siblings as such has no significant effect. We also find that number of full-siblings has a strong effect irrespective of having grown up together. Hence, both nature and nurture play a role.

This theoretical paper shows how a central government can induce a policy concerning a municipal matter through a package of a policy requirement and a grant. We find that, due to fiscal competition and the possibility for citizens to move between municipalities, the central government can make all municipalities adopt the policy requirement despite the grant not being sufficiently high to make them gain from the reform. We apply this model to a recent Swedish child-care fee reform and can explain why all Swedish municipalities implemented the maximum child-care fee although it had a negative impact on many municipalities’ finances.

Survey data is used to investigate how birth order and having siblings affect positional concerns in terms of success at work and of income. We find that only-children are the most concerned with relative position, but that number of siblings increases the concern among those who grew up together with siblings. Furthermore, people whose parents often compared them with their siblings have stronger positional concerns in general. We find differences depending on whether the issue is relative income or relative successfulness, and that people generally have stronger positional concern in relation to friends, but less so in relation to parents and least in relation to siblings. We also find that younger respondents are far more concerned with relative position than older in all studied situations.

In many developing and transitional countries with limited public income redistribution, inter-household transfers in general, and gifts in particular, are sizable and very important. We use unique Romanian survey data that enables us to isolate pure gifts from other private transfers. We explicitly focus on the importance of community-wide social norms, and find that they indeed play a major role for both the occurrence and the values of gifts received. More exactly, our results suggest that the overall predominant gift motive among Romanian households is a norm of reciprocity. Moreover, this norm seems to be dominating for gifts to middle- and high-income households. Even though poor households receive to the same extent, norms of both impure altruism and reciprocity tend to be important. Hence, although the poor may not reciprocate gifts to the same extent as the rich, they still receive, since there is a social norm to give, especially to the poor.

We analyze how habit formation affects optimal environmental taxation, when consumption of a habitual good causes a negative external effect on the environment. In a simple two-period model, we show that optimal taxation is still Pigouvian, where tax rates equal marginal damage in each period. However, the magnitudes of the tax rates are affected by habit formation. Using simulations we show that since consumption of the habitual good increases over time, so does the optimal tax rate, implying a higher tax rate in period two than in period one. The discrepancy increases in habitual strength. Given the development of the tax rates over time we discuss the welfare loss from imposing a secondbest environmental tax and its relation to habitual strength. Further, we analyze how optimal taxation changes if we relax the assumption of time-consistency

We find that through labeling one can significantly affect attitudes towards a tax. The gasoline tax meets a stronger reluctance than virtually the same tax when it is called the CO2 tax on gasoline.

We analyse Swedes’ opinions about the level of taxation for eleven different taxes to see what taxes people are most reluctant to and why. The most unpopular tax is the real estate tax, while the corporate tax is the least unpopular. We find a strong self interest effect in attitudes, and for corrective taxes information increases acceptance. We perform two case studies of Swedish tax policy and find political economy reasons for the recent abolition of the gift and inheritance taxes, and weak support for the ongoing green tax shift from labour to environmental taxes.

To what extent do people avoid taxes on intra-family transfers (be- quests and gifts), and how would integration (unification) of the dif- ferent transfers taxes affect tax avoidance? These issues are important for families and their welfare, as well as for governments and their pos- sibilities of raising revenue from transfer taxes. In this paper we study the effects of transfer taxes on altruistic parents’ transfers to their chil- dren. Using a theoretical model we find that altruistic parents do not necessarily tax minimize. However, in some cases when they do, there is an infinitely large excess burden of a transfer tax. We also find that integration of transfer taxes reduces tax avoidance. All tax avoidance is eliminated with complete integration.

Unless people pay the taxes they are obliged to pay, a general welfare state will eventually collapse. Thus, for the welfare state to survive in the long run, tax compliance is of utmost importance. Using Swedish individual survey data we analyze which factors affect the perception of tax evasion. The analysis is conducted on ten different taxes and the results differ widely. Hence, we show that it is important to study different taxes separately rather than treating tax evasion as one common phenomenon. In this paper we focus on the importance of different kinds of trust. Whether or not people in general are regarded as trustworthy only has a minor impact on perceived tax evasion. Instead, what matters is trust or distrust in politi- cians. People who distrust the parliament are more likely than others to think that tax evasion is common, and the result holds for most of the taxes studied. This may have severe long-run consequences for the welfare state. If people stop trusting their leading politicians, social norms about tax compliance deteriorate and the possibilities of collecting taxes for maintaining the welfare state are reduced.

We study the motives behind parents' transfers to their children, and the relationship between tangible transfers and educational investments. Another issue is the channels parents choose for tangible transfers. Do they use bequests and inter vivos gifts as substitutes or complements? We use a recent Swedish data set. It is superior to previously used data as it has information on both inheritances and gifts received. Our empirical analysis gives some support for parents having altruistic motive for their transfers. We also find evidence that parents use bequest and gifts as substitutes.