Working Paper: NBER ID: w21264
Authors: Ricardo Perez-Truglia; Ugo Troiano
Abstract: Many federal and local governments rely on shaming penalties to achieve policy goals, but little is known about how shaming works. Such penalties may be ineffective, or even backfire by crowding out intrinsic motivation. In this paper, we study shaming in the context of the collection of tax delinquencies. We sent letters to 34,334 tax delinquents who owed a total of half a billion dollars in three U.S. states. We randomized some of the information contained in the letter to vary the salience of financial penalties, shaming penalties, and peer comparisons. We then measured the effects of this information on subsequent payment rates, and found that increasing the visibility of delinquency status increases compliance by individuals who have debts below $2,500, but has no significant effect on individuals with larger debt amounts. Financial reminders have a positive effect on payment rates independent of the size of the debt, while information about the delinquency of neighbors has no effect on payment rates.
Keywords: shaming penalties; tax compliance; behavioral economics; field experiment
JEL Codes: H26; H63; K42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increasing the visibility of delinquency status (K42) | increases compliance among individuals with debts below $2,500 (K35) |
| financial reminders (G51) | positively influence payment rates (J33) |
| peer comparisons (C92) | no significant effect on payment behavior (D19) |