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Free keywords:
Patriotism, Fiscal policy, Warm glow, Migration, Identification
Abstract:
The provision of public goods by any government generally requires a significant amount of financial resources. Yet the inherent characteristics of public goods imply that individuals who refuse to contribute financially cannot easily be excluded from the benefits provided by public goods. This chapter explores how, and when, patriotism can increase private incentives to make contributions to the common good – and thereby mitigate the free rider problem at the heart of public finances. We discuss this patriotism-taxation relation in times of war as well as peace and evaluate whether patriotism might help to (partially) moderate the incentives to avoid or even evade taxes. Finally, we consider the role of two potential mechanisms – i.e., migration and identification – underlying the patriotism-taxation relation and examine governments’ incentives to invest in instilling patriotic sentiments in the population for fiscal reasons.
