QuBE Working Papers

2012

• #002
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  JEL-Codes:

  J7;C93;P36

  Keywords:

  labor market discrimination, artefactual field experiment, hukou

  Public Policy and Individual Labor Market Discrimination: An Artefactual Field Experiment in China

  Uwe Dulleck, Jonas Fooken and Yumei He

  We study discrimination based on the hukou system, a policy segregating migrants and locals in urban China. We hired household aids as participants in our artefactual field experiment and use a gift exchange game to study labor market discrimination. We find that social discrimination based on hukou status also implies individual level discrimination. To identify whether discrimination is statistical or taste-based we introduce the wage promising game, a gift exchange game with a cheap talk wage promise. We find that discrimination is taste-based: Status is exogenous for our participants, migrants and locals behave similarly and discrimination increases when reasons for statistical discrimination are removed.

• #001
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  JEL-Codes:

  H26, H41, K42, D31, D63, C91

  Keywords:

  tax compliance, psychic costs, stress, tax morale, cooperation, heart rate variability, biomarkers, experiment

  Tax Compliance and Psychic Costs: Behavioral Experimental Evidence Using a Physiological Marker

  Uwe Dulleck, Jonas Fooken, Cameron Newton, Andrea Ristl, Markus Schaffner and Benno Torgler

  Although paying taxes is a key element in a well-functioning civilized society, the understanding of why people pay taxes is still limited. What current evidence shows is that, given relatively low audit probabilities and penalties in case of tax evasion, compliance levels are higher than would be predicted by traditional economics-of-crime models. Models emphasizing that taxpayers make strategic, financially motivated compliance decisions, seemingly assume an overly restrictive view of human nature. Law abidance may be more accurately explained by social norms, a concept that has gained growing importance as a facet in better understanding the tax compliance puzzle. This study analyzes the relation between psychic cost arising from breaking social norms and tax compliance using a heart rate variability (HRV) measure that captures the psychobiological or neural equivalents of psychic costs (e.g., feelings of guilt or shame) that may arise from the contemplation of real or imagined actions and produce immediate consequential physiologic discomfort. Specifically, this nonintrusive HRV measurement method obtains information on activity in two branches of the autonomous nervous system (ANS), the excitatory sympathetic nervous system and the inhibitory parasympathetic system. Using time-frequency analysis of the (interpolated) heart rate signal, it identifies the level of activity (power) at different velocities of change (frequencies), whose LF (low frequency) to HF (high frequency band) ratio can be used as an index of sympathovagal balance or psychic stress. Our results, based on a large set of observations in a laboratory setting, provide empirical evidence of a positive correlation between psychic stress and tax compliance and thus underscore the importance of moral sentiment in the tax compliance context.