Contagious compliance

Measures that induce people to comply with laws can encourage others in their neighbourhood to do so even if they aren’t targeted directly, according to research by Hertie School Professor of Economics Christian Traxler and co-authors.  “Compliance Behavior in Networks: Evidence from a Field Experiment” will be published in the American Economic Journal: Applied Economics, and is based on joint research with Francesco Drago of the University of Messina and Friederike Mengel of the University of Essex. It sheds light on a key issue for policymakers – how to maximise the impact of enforcement measures.

The research project builds upon a randomised trial that sent different types of mailings to potential evaders of TV license fees in Austria. While earlier work examined the direct effects of these mailings, the current study used much richer data, involving over 500,000 households from rural Austria, that allowed the researchers to observe if and how people reacted when their neighbours received mailings from the enforcement authority.

The researchers examined whether and under which circumstances the letters spurred non-recipients to comply. They found that “untreated” households were indeed responsive. The letters made nearby cheaters more likely to switch from evasion to compliance. While these indirect effects were small at the individual level, they added up to a sizable number. In fact, the overall spillover was close to the direct effect of the mailing campaign.

A challenge for policymakers

A key issue for policymakers is how to maximise the impact of enforcement measures. The research offers some important insights into this challenge. “Interacting with individuals and firms that are suspected of violating laws is an important challenge for many governmental agencies and regulators,” the researchers write. “Gaining more knowledge on how treatment-induced information diffuses among friends, neighbors or co-workers – thus influencing the behavior among a broader population – is important from a policy perspective: it enables authorities to target enforcement interventions to maximize their overall impact [……] and offers […] a new perspective on the debate about ‘concentrated’ versus ‘widely spread’ enforcement actions.”

The study also analyses how the geographic structure of neighbourhood networks shapes communications   relevant to the spread of compliance. It looks at which households are “best targeted” (depending on their position within a network) to maximise spillover effects, and whether these effects are maximised when treatments are widely spread or locally concentrated.

The findings on geographic networks are potentially useful in other applications such as fundraising or marketing campaigns, or for tackling issues such as household energy consumption or technology adoption, the authors say.

Read the full paper here.