Did the introduction of the Euro lead to money illusion? : empirical evidence from Germany

Bittschi, Benjamin ; Duppel, Saskia

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URL: https://ub-madoc.bib.uni-mannheim.de/39703
URN: urn:nbn:de:bsz:180-madoc-397036
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: ZEW Discussion Papers
Volume: 15-058
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D12 , E03 , E40,
Keywords (English): Money illusion , euro introduction , charitable giving , natural experiment
Abstract: Using the introduction of the euro as a natural experiment, we provide economywide evidence for money illusion based on declared donations from German administrative income tax data. Our results suggest a magnitude of the money illusion effect between 2.4% and 7.6%. Compared to previous studies on money illusion in the course of the euro currency changeover this effect size is significantly lower. We trace this back to the more comprehensive donation data in our study compared to hitherto studied face-to-face collections, which makes our results less prone to "power of the ask" and social pressure effects.

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