Publisher:
The University of Nottingham, Centre for Decision Research and Experimental Economics (CeDEx), Nottingham
Abstract:
We investigate the effects of an institutional mechanism that incentivizes tax payers to blow the whistle on collusive corruption and tax compliance. We do this through a leniency program. In our experiment we nest collusive corruption within a tax evasion framework. We not only study the effect of the presence of such a mechanism on behavior, but also the dynamic effect caused by the introduction and the removal of leniency. We find that in the presence of a leniency mechanism, subjects collude and accept bribes less, while paying more taxes. We find no evidence that it encourages bribe offers. Our results show that the introduction of the opportunity to blow the whistle decreases collusion and bribe acceptance rate, and it increases the collected tax yield. It also does not encourage bribe offers. In contrast, the removal of the institutional mechanism does not induce negative effects, suggesting a positive spillover effect of leniency that persists even after the mechanism has been removed.
