Sanctioning of loophole exploiters

Last registered on July 28, 2023

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Pre-Trial

Trial Information

General Information

Title

Sanctioning of loophole exploiters

RCT ID

AEARCTR-0011828

Initial registration date

July 23, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

July 28, 2023, 1:33 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

United States of America

Region

Primary Investigator

Name

Renke Schmacker

Affiliation

WZB & DIW Berlin

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Tobias König

PI Affiliation

Linnaeus University

Contact Investigator

PI Name

Lydia Mechtenberg

PI Affiliation

University of Hamburg

Contact Investigator

Additional Trial Information

Status

In development

Start date

2023-07-23

End date

2023-07-30

Keywords

Behavior

Additional Keywords

JEL code(s)

Secondary IDs

Prior work

This trial is based on or builds upon one or more prior RCTs.

Abstract

In this experiment, we examine the conditions under which individuals consider the exploitation of loopholes acceptable. The experiment involves two types of participants: workers and spectators. Workers are matched into groups of four and are supposed to pay a tax designed to equalize their incomes. However, they have the option to work on a calculation task to reduce their tax rate at the expense of other participants. The calculation task contains a loophole, which allows workers to strongly lower their tax rate. Spectators judge whether exploiting the loophole is appropriate or not. They can decide whether to sanction workers who exploited the loophole. In separate treatments, we vary whether pre-tax incomes reflect earned merits and the efficiency costs of redistribution.

This experiment relates to experiment AEARCTR-0011610 (https://doi.org/10.1257/rct.11610-1.0). While the other experiment looked at the treatment variation for the decision to close the loophole, this experiment studies the treatment variation for the sanctioning decision.

External Link(s)

Registration Citation

Citation

König, Tobias, Lydia Mechtenberg and Renke Schmacker. 2023. "Sanctioning of loophole exploiters." AEA RCT Registry. July 28. https://doi.org/10.1257/rct.11828-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

3 treatments: Baseline, Effort, Inefficiency.

Intervention Start Date

2023-07-23

Intervention End Date

2023-07-30

Primary Outcomes

Primary Outcomes (end points)

Share of spectators that sanction loophole exploiters: Spectators are matched with a group of workers from a previous session and can decide whether loophole exploiters should be sanctioned.

Appropriateness of using the loophole: Spectators’ first-order and second-order beliefs of the appropriateness of exploiting the loophole.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Appropriateness of tax adjustment: Spectators’ first-order and second-order beliefs of the appropriateness of tax adjustment in general.

Appropriateness of ex-post sanctioning: Spectators’ first-order and second-order beliefs of the appropriateness of sanctioning a loophole exploiter ex-post.

As manipulation checks, we estimate treatment effects on factors related to the treatments. These include participant perceptions regarding the deservedness of gross incomes in the experiment, whether they successfully detected the loophole and their estimations of how many others they believe did, their views on whether individuals who exploit the loophole are clever, and their opinions on whether the tax revenues are being wasted.

We will investigate mechanisms explaining the decision to sanction the loophole exploiters using the factors above, as well as the belief of how many subjects exploit the loophole and by how much.

Exploratively, we will investigate whether behavior in the experiment is correlated with political views and voting behavior in previous presidential elections. We will also investigate the relationship with their beliefs regarding the appropriateness of loopholes, preferences for redistribution, and perceptions of the efficiency of public spending.

Exploratively, we will also investigate the behavior of the workers. Here, we focus on their choice to use the loophole and on whether they consider using the loophole appropriate.

Secondary Outcomes (explanation)

Experimental Design

Spectator-worker design with randomized interventions

Experimental Design Details

Participants are matched into groups of four (two green workers and two orange workers). Green workers receive a higher gross income than orange workers. Green workers are supposed to pay a tax of 60% and orange workers of 20%, such that post-tax incomes are equal. However, green workers can work on a calculation task to adjust their tax rate. For each correct calculation, they reduce their tax rate by 3 percentage points. There is a loophole in the calculation task, which allows workers to decrease their tax rate strongly without making any calculations.

Spectators are shown the instructions of the workers and they can try out the task as well. Afterward, they are asked whether they would like to sanction workers who exploited the loophole. Moreover, they are asked how appropriate they consider the exploitation of the loophole.

Worker sessions for the ex-post decision were conducted prior to the spectator experiments. The choices made by randomly selected spectators are then implemented for these worker sessions.
In a post-experimental questionnaire, we elicit the motives for spectator decisions, general political attitudes, and background characteristics.

For the experimental interventions, we test the following hypotheses (relative to the baseline treatment):
H1a: In the Effort treatment, individuals are less likely to sanction loophole exploiters.
H1b: The Effort treatment increases the appropriateness of exploiting the loophole.
H2a: In the Inefficiency treatment, individuals are less likely to sanction loophole exploiters.
H2b: The Inefficiency treatment increases the appropriateness of exploiting the loophole.

We will estimate heterogeneous treatment effects by political affiliation, voting behavior in previous presidential elections, income, education, gender, and age.

We are interested in heterogeneous treatment effects by political affiliation, however, Prolific has a substantially higher share of Democratic participants. Therefore, we will use quotas to target the vote share of Donald Trump in the presidential election 2020.

We will do robustness checks by excluding participants who answered the comprehension questions incorrectly on the first try.

Randomization Method

Computerized randomization using Qualtrics. We use the option “evenly present elements.”

Randomization Unit

Individual

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

Target sample: 230 to 280 spectators per treatment conditional on the ability to fill our quotas (see experimental design).

We will include data from a pilot with n=50 per treatment in the final data.

Sample size: planned number of observations

See above

Sample size (or number of clusters) by treatment arms

See above

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Assuming a baseline share to sanction the loophole exploiter of 0.51, the MDE with N=280 is 0.164 at power=0.8 and alpha=0.05. If we end up with N=230, the MDE is 0.180. Assuming a baseline appropriateness rating of -0.10 (sd 0.67), the MDE is 0.224 at n=280, power=0.8 and alpha=0.05. If we end up with N=230, the MDE is 0.248.

Supporting Documents and Materials

IRB