Monetary rewards for tax compliance: (When) are they effective? (2024), with Lilith Burgstaller, Annabelle Doerr, Cesifo WP No. 10211

Summary in German: ifo Schnelldienst, 2023, 76, Nr. 02, 43-46 

Summaries in English: EconPol Forum 24 (1), CESifo, Munich, 2023, VoxEU column 

Media coverage: SWR Radio

We study the causal effects of household tax credits on the willingness to demand legally provided services using two survey experiments with 1.974 German homeowners. We vary the type of the tax credit, the refund rate, and whether the financial benefit is made salient. All tax credits increase the willingness to pay for offers with invoice. The effectiveness is highest when the tax credit is granted at source in combination with a high refund rate or when the financial advantage is made salient. The effect of salience is as high as the effect of increasing the rate of the tax credit by 10 ppts. However, we observe substantial free-riding: at least two thirds would have demanded an offer without invoice also without the subsidy.

Monetary Incentives and the Contagion of Unethical Behavior (2023), with Benoit Le Maux, David Masclet, ZEW Discussion Paper can be found here (email me for the most recent version),
Accepted at the Journal of the Economic Science Association

We analyze both theoretically and empirically how monetary incentives and information about others’ behavior affect dishonesty. We run a laboratory experiment with 560 participants, each of whom observes a number from one to six with there being a payoff associated with each number. They can either truthfully report the number they see or lie about it in order to increase their payoff. We vary both the size of the payoff (Low, High, and Very High) and the amount of information about others’ dishonesty (With and Without Information). We first find that dishonesty falls in the Very High treatment. Second, while social information has on average at most a weak positive effect, there is a strong effect if the accuracy of individuals’ beliefs is accounted for. Third, social information and payoffs do not interact with each other. 

The absolute and relative gain of dishonesty (2024), with Benoit Le Maux (email me for a copy). 

We distinguish the absolute and relative gain of dishonesty by varying two payoff dimensions in a cheating game: the payoff level and payoff  difference between being successful or not. In our online experiment, dishonesty tends to decrease when the level of payoffs is higher and to increase when the absolute difference between payoffs  increases. Comparing the conditions with the lowest and highest relative gain, the number of reported successes decreases by one third of the standard deviation. Our results suggest that organizations should design reward schemes such that people earn a reasonable amount from not being successful and only a relatively small bonus from being successful.