Abstract
The functioning of welfare states and tax systems is fostered by social norms to obey the rules of the system. Morale can change and react to new incentives. In particular, a deep economic crisis with increasing unemployment and reduced prospects for market income may have a norm eroding effect. This study explores the link between economic crisis and morale. Our theoretical reasoning is based on an economic approach to the evolution of norms, according to which norms are influenced by self-interest. A distinction is made between two dimensions of citizens’ morale: benefit and tax morale. Our econometric evidence based on data from the World Value Survey suggests that a sharp hike in unemployment reduces the morale standards along both dimensions. The crisis impact on benefit morale is conditional on the existence of generous benefit schemes.
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Notes
Note that in this view deeds and normative convictions are highly correlated: Norms are adjusted to legitimize a changing behaviour. This is important in interpreting our empirical findings below which are based on normative judgements and not on observable behaviour.
In an evolutionary interpretation norms survive which help the survival of the group or family (Axelrod 1986). Conversely, norms are abandoned if changing circumstances render them detrimental to survival.
The belief, whether own responsibility or exogenous factors are essential for labour market success and individual economic prosperity, has identified to be an essential explanation for the support for the welfare state with large cross-country differences e.g., between the US and European countries (Alesina and Angeletos 2005; Alesina and Giuliano 2009).
Not all of these effects can be expected to be fully symmetric in the sense that a situation of an economic boom would simply have an effect of the opposite sign. It is, for example, unclear whether a boom situation really can augment trust into politicians. Or it is difficult to see how—beyond the point where full employment is reached—a boom would affect the possibility of shirkers to hide.
Note that the World Value Survey is no panel. The regressions in this paper are based on observations from the period between 1981 and 2000.
Countries included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and United States.
The calculations are approximative because the marginal effects refer to infinitesimal changes of the independent variable.
Note that the World Economic Crisis of the 1930s was different insofar the modern welfare state was still largely absent. So even if data on social norms from this period were available (which is not the case) the comparability would not be given.
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Acknowledgments
Support by the “Förderkreis Wissenschaft und Praxis at the Centre for European Economic Research” is gratefully acknowledged. I gratefully acknowledge numerous helpful comments from the participants of the Conference “The Shadow Economy, Tax Evasion and Social Norms” in Münster in July 2009 and from an anonymous referee.
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Heinemann, F. Economic crisis and morale. Eur J Law Econ 32, 35–49 (2011). https://doi.org/10.1007/s10657-010-9165-z
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DOI: https://doi.org/10.1007/s10657-010-9165-z