Tax morale and social capital: An empirical investigation among European citizens

Abstract

Despite the extensive literature examining determinants of tax morale, little is still known about the relationship between the associational involvement of citizens and their willingness to pay taxes. Given the insights offered by the social capital literature regarding the role of voluntary organizations in shaping civic engagement, this study empirically investigates how membership of different types of associations could influence individual tax morale in Europe. With this in mind, we exploit the information available in the fifth wave of the European Values Study for citizens of 34 countries. Unlike previous studies on tax morale, we classify the types of voluntary associations depending on their potential to build out-group “bridging” or in-group “bonding” social ties. In this study, to carry out the classification, three alternative approaches are considered which are based on the sociodemographic heterogeneity within associations, the interconnections between them, and a combination of both. Our findings show that, after controlling for different individual characteristics and country-specific unobserved heterogeneity, those survey respondents involved in bridging associations tend to exhibit higher levels of tax morale, while the opposite is found for bonding associations. The results are quite robust for the three approaches and different estimation strategies, including an instrumental-variables methodology.