Tax Morale and Perceived Intergenerational Mobility: a Machine Learning Predictive Approach

Caferra, Rocco and Morone, Andrea (2019): Tax Morale and Perceived Intergenerational Mobility: a Machine Learning Predictive Approach.

Abstract

The purpose of this paper is to investigate the linkage between the perceived intergenerational mobility and the preferences for tax payment. Unfortunately, we do not have a unique dataset, however missing data might be predicted by employing di�erent methods. We compare the efficiency of k-nearest-neighbors (kNN), Random Forest (RF) and Tobit-2-sample-2-Stage (T2S2S) techniques in predicting the perceived inter- generational mobility, hence we exploit the predicted values to estimate the relation with tax morale. Results provide evidence of a strong negative relation between perceived mobility and tax cheating, suggesting that fairness in tax payment has also to be seen on the light of the perceived efficiency of the welfare state in providing more opportunities across generations.

• Item Type: MPRA Paper
• Language: English
• Keywords: intergenerational mobility; tax morale; missing data
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty

References

1] Alesina A. and Rodrik D. , “Distributive Politics and Economic Growth” ,The Quarterly Journal of Economics ,Vol. 109, No. 2 , pp. 465-490, May 1994;

[2] Allingham M.G. and Sandmo A., “Income tax evasion: a theoretical analysis”, Journal of Public Economics, Vol. 1 Nos 3-4, pp. 323-338,1972;

[3] Amendola A., Dell'Anno R. and Parisi L., “Happiness and inequality in European countries: is it a matter of peer group comparisons?” , Economia Politica, 2018; [4] Barone G. and Mocetti S. , “Tax morale and public spending inefficiency” , International Tax and Public Finance, Vol. 18 No. 6, pp. 724-749.,2011;

[5] Becker G. S. and Tomes N., “Human Capital and the Rise and Fall of Families”, Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 1-39, July 1986;

[6] Belmonte A., Dell'Anno R. and Teobaldelli D., “Tax morale, aversion to ethnic diversity, and decentralization” , European Journal of Political Economy, 2018;

[7] Bénabou R., Human capital, inequality, and growth: A local perspective, European Economic Review, Volume 38, Issues 3-4, Pages 817-826, April 1994;

[8] Checchi D.,”Inequality in Incomes and Access to Education: A Cross-Country Analysis (1960-95)”, Labour, Vol. 17, pp. 153-201, June 2003;

[9] Choi A., Jerrim J. and Simancas R., Two-Sample Two-Stage Least Squares (TSTSLS) estimates of earnings mobility: how consistent are they?, Survey Research Methods, Vol. 10, No. 2, pp. 85-102, 2016;

[10] Dell'Anno R., “Tax evasion, tax morale and policy maker's effectiveness” , The Journal of Socio-Economics, Vol. 38 No. 6, pp. 988-997,2009;

[11] Doerrenberg P. and Peichl A. , “Progressive taxation and tax morale” , IZA Discussion Paper,No. 5378, The Institute for the Study of Labor (IZA),Bonn, December, 2010;

[12] European Values Study, EVS 1981 - 2008 Variable Report, Longitudinal data Files;

[13] Franzini M. and Pianta M., “Explaining Inequality”,Routledge, 2015;

[14] Hastie T., Tibshirani R. and Friedman J.,”The Elements of Statistical Learning: Data Mining, Inference, and Prediction”, Springer, 2017;

[15] Horodnic, I.A., “Tax morale and institutional theory: a systematic review.” International Journal of Sociology and Social Policy, 38 (9/10). pp. 868-886. ISSN 0144-333X, 2018;

[16] International Social Survey Programme,ISSP 2009 - Social Inequality IV;

[17] Luttmer E.F.P. and Singhal M. , “Tax morale”, Journal of Economic Perspectives, Vol. 28 No. 4,pp. 149-168, 2014;

[18] Mullainathan S. and Spiess J., “Machine Learning: An Applied Econometric Approach”, Journal of Economic Perspectives, American Economic Association, 2017;

[19] Mulligan C., “Some Evidence on the Role of Imperfect Capital Markets for the Transmission of Inequality”, Mimeo, University of Chicago, 1995;

[20] Pellizzari M., “Employers' Search and the Efficiency of Matching”, British Journal of Industrial Relations, Vol. 49, No. 1, pp. 25-53, 2011;

[21] Piketty T., “Theories of Persistent Inequality and Intergenerational Mobility”, CNRS-CEPREMAP, 2000;

[22] R Core Team, R: A language and environment for statistical computing, R Foundation for Statistical Computing, Vienna, Austria, 2013;

[23] Roderick and J. A.Little Donald and B. Rubin,Statistical Analysis with Missing Data, Wiley Series in Probability and Statistics, 1987;

[24] Torgler B. Schneider F. and Schaltegger C.A. , “With or against the people? The impact of a bottom-up approach on tax morale and the shadow economy”, Working/Discussion Paper No. 211, QUT School of Economics and Finance, Brisbane, February 2007b;

[25] Torgler B. Schneider F. and Schaltegger C.A., “Local autonomy, tax morale, and the shadow economy”, Public Choice, Vol. 144 Nos 1-2, pp. 293-321,2010;

[26] Torgler B. , “Cross-culture comparison of tax morale and tax compliance: evidence from Costa Rica and Switzerland” , International Journal of Comparative Sociology, Vol. 45 Nos 1-2, pp. 17-43, 2004a;

[27] Torgler B. , “Tax morale in Asian countries” , Journal of Asian Economics, Vol. 15, pp. 237-266, 2004b;

[28] Torgler B. , “Tax morale, trust and corruption: empirical evidence from transition countries” , Working Paper No. 2004-05, Center for Research in Economics, Management and the Arts, Basel, 2004c;

[29] Trüdinger E.M. and Hildebrandt A., “Causes and contexts of tax morale: rational considerations, community orientations, and communist rule” , International Political Science Review, Vol. 34 No. 2, pp. 191-209, 2013;

[30] Vythelingum P., Soondram H. and Jugurnath B., “An assessment of tax morale among Mauritian taxpayers” , Journal of Accounting and Taxation, Vol. 9 No. 1, pp. 1-10, 2017;

[31] Williams C.C. and Krasniqi B., “Evaluating the individual- and country-level variations in tax morale: evidence from 35 Eurasian countries” , Journal of Economic Studies, Vol. 44 No. 5, pp. 816-832, 2017;

[32] Williams C.C. and Martinez Á. , “Explaining cross-national variations in tax morality in the European Union: an exploratory analysis” , Studies of Transition States and Societies, Vol. 6 No. 1, pp. 5-18, 2014.