Life Satisfaction and Tax Preferences in Transition Economies

Talk by Luca Andriani (London) as part of the Research Seminar Series of the IOS Economics Department.

Pro-public good individual’s tax behaviours and preferences cannot lie exclusively on appropriate formal institutions. Particularly in countries under institutional and economic transition. We embrace the recent perspective arguing that higher quality of life conditions makes people better citizens, more civically committed and more willing to contribute to a better social and institutional environment. Accordingly, looking at the transition economies of Central and Eastern Europe (CEE) and the Former Soviet Union (FSU), we analyse the role of life satisfaction in the willingness of an individual to pay more taxes with the aim of improving public good provision relating to education, health, and support of people in need, as well as to combat climate change. We exploit data from the third wave of the Life in Transition Survey (2015-2016). Empirical evidence suggests that individuals reporting higher scores of life satisfaction are more willing to contribute to different types of public and common goods. These results are robust to a series of sensitivity analyses including 2SLS estimations. In terms of policy recommendations, our work reinforces the perspective of the co-benefit, indicating as the positive impact that perceived quality-of-life conditions have on different socio-economic aspects including social outcome, and other human behaviour. In our specific case, our results suggests that policies improving citizens’ life conditions and expectations could have spill-over effect on individuals’ tax preferences and behavioural aspects.