New Research on Participatory Governance and Tax Compliance

At the World Bank, we have published two new studies on the effect of citizen engagement on tax morale and tax compliance.

In the first, published last month, we examine the Brazilian case, using data from all 5,570 municipalities in the country. We focus on two types of institutions that municipalities can voluntarily adopt to give citizens the opportunity to voice their preferences on policies and spending: public policy councils and participatory budgeting. Municipalities who adopt these practices collect significantly more local taxes. For instance, the adoption of participatory budgeting leads to the collection of up to 39% more tax revenues. Overall, the increase in municipal budgets is equivalent to roughly 40% of their capital investment spending.

But how context-dependent are these findings?

In the second study, published last week, we present results from the largest cross-country experiment ever conducted on tax morale. A unique online experiment, the study involved 65,000 individuals across 50 countries from all continents. Our results show that regardless of government systems, levels of development and culture, citizens are more committed to tax compliance when they: i) are able to voice their preferences about government spending, and ii) learn about government oversight of public resources.

I hope you will enjoy the reading.

Of Governance and Revenue: Participatory Institutions and Tax Compliance in Brazil

Michael Touchton, Brian Wampler and Tiago C. Peixoto

Abstract: Traditionally, governments seek to mobilize tax revenues by expanding their enforcement of existing tax regimes and facilitating tax payments. However, enforcement and facilitation can be costly and produce diminishing marginal returns if citizens are unwilling to pay their taxes. This paper addresses gaps in knowledge about tax compliance, by asking a basic question: what explains why citizens and businesses comply with tax rules? To answer this question, the paper shows how the voluntary adoption of two different types of participatory governance institutions influences municipal tax collection in Brazil. Municipalities that voluntarily adopt participatory institutions collect significantly higher levels of taxes than similar municipalities without these institutions. The paper provides evidence that moves scholarship on tax compliance beyond enforcement and facilitation paradigms, while offering a better assessment of the role of local democratic institutions for government performance and tax compliance.

Voice and Punishment : A Global Survey Experiment on Tax Morale

Fredrik M. Sjoberg, Jonathan Mellon, Tiago C. Peixoto, Johannes Hemker and Lily L. Tsai

Abstract: An online survey experiment spanning 50 countries finds sizable improvements in tax morale when (a) the salience of anti-corruption efforts is increased and (b) citizens are allowed to voice their expenditure preferences to the government. These results hold very broadly across a uniquely large and diverse sample of respondents from all continents. The findings are consistent with theories emphasizing the role of democratic accountability, as well as of perceptions of legitimacy and “retributive justice,” in generating voluntary tax compliance. Implications and avenues for further research are discussed.

Bit by Bit: Social Research in the Digital Age


Pic by Jim Kaskade (flickr creative commons)

Matthew Salganik, Professor of Sociology at Princeton University, has recently put his forthcoming book on social research and big data online for an open review. Matthew is the author of many of my favorite academic works, including this experiment in which he and Duncan Watts test social influence by artificially inverting the popularity of songs in an online music market. He is also the brains behind All Our Ideas, an amazing tool that I have used in much of the work that I have been doing, including “The Governor Asks” in Brazil.

As in the words of Matthew, this is a book “for social scientists that want to do more data science, and it is for data scientists that want to do more social science.” Even though I have not read the entire book, one of the things that has already impressed me is the simplicity with which Matthew explains complex topics, such as human computation, distributed data collection and digital experiments. For each topic, he highlights opportunities and provides experienced advice for those working with big data and social sciences. His stance on social research in the digital age is brilliant and refreshing, and is a wake-up call for lots of people working in that domain. Below is an excerpt from his preface:

From data scientists, I’ve seen two common misunderstandings. The first is thinking that more data automatically solves problems. But, for social research that has not been my experience. In fact, for social research new types of data, as opposed to more of the same data, seems to be most helpful. The second misunderstanding that I’ve seen from data scientists is thinking that social science is just a bunch of fancy-talk wrapped around common sense. Of course, as a social scientist—more specifically as a sociologist—I don’t agree with that; I think that social science has a lot of to offer. Smart people have been working hard to understand human behavior for a long time, and it seems unwise to ignore the wisdom that has accumulated from this effort. My hope is that this book will offer you some of that wisdom in a way that is easy to understand.

From social scientists, I’ve also seen two common misunderstandings. First, I’ve seen some people write-off the entire idea of social research using the tools of the digital age based on a few bad papers. If you are reading this book, you have probably already read a bunch of papers that uses social media data in ways that are banal or wrong (or both). I have too. However, it would be a serious mistake to conclude from these examples that all digital age social research is bad. In fact, you’ve probably also read a bunch of papers that use survey data in ways that are banal or wrong, but you don’t write-off all research using surveys. That’s because you know that there is great research done with survey data, and in this book, I’m going to show you that there is also great research done with the tools of the digital age.

The second common misunderstanding that I’ve seen from social scientists is to confuse the present with the future. When assessing social research in the digital age—the research that I’m going to describe in this book—it is important to ask two distinction questions:

How well does this style of research work now?

How well will this style of research work in the future as the data landscape changes and as researchers devote more attention to these problems?

I have only gone through parts of the book (and yes, I did go beyond the preface). But from what I can see, it is a must read for those who are interested in digital technologies and the new frontiers of social research. And while reading it, why not respond to Matthew’s generous act by providing some comments? You can access the book here.