Nurturing regulatory compliance: Is procedural ... - Wiley Online Library

25 downloads 14379 Views 239KB Size Report
Nurturing regulatory compliance: Is procedural justice effective when people question the legitimacy of the law? Kristina Murphy. Alfred Deakin Institute, Deakin ...
Regulation & Governance (2009) 3, 1–26

doi:10.1111/j.1748-5991.2009.01043.x

Nurturing regulatory compliance: Is procedural justice effective when people question the legitimacy of the law? Kristina Murphy Alfred Deakin Institute, Deakin University, Geelong, Vic., Australia

Tom R. Tyler Department of Psychology, New York University, New York, NY, USA

Amy Curtis School of Psychology, Australian National University, Canberra, ACT, Australia

Abstract Procedural justice generally enhances an authority’s legitimacy and encourages people to comply with an authority’s decisions and rules. We argue, however, that previous research on procedural justice and legitimacy has examined legitimacy in a limited way by focusing solely on the perceived legitimacy of authorities and ignoring how people may perceive the legitimacy of the laws and rules they enforce. In addition, no research to date has examined how such perceptions of legitimacy may moderate the effect of procedural justice on compliance behavior. Using survey data collected across three different regulatory contexts – taxation (Study 1), social security (Study 2), and law enforcement (Study 3) – the findings suggest that one’s perceptions of the legitimacy of the law moderates the effect of procedural justice on compliance behaviors; procedural justice is more important for shaping compliance behaviors when people question the legitimacy of the laws than when they accept them as legitimate. An explanation of these findings using a social distancing framework is offered, along with a discussion of the implications the findings have on enforcement. Keywords: compliance, legitimacy, motivational postures, procedural justice, regulation.

Introduction A long tradition of regulatory research has been interested in asking: What motivates people to comply with the law? A closely related question seeks to address how regulators can best encourage long-term voluntary compliance with their rules and decisions. A debate in the regulatory literature has been between those who suggest compliance is shaped by implementing harsh sanctions and penalties (the deterrence view), and those who believe that gentle persuasion and cooperation works in securing compliance (the accommodative view; see Ayres & Braithwaite 1992).

Correspondence: Kristina Murphy, Alfred Deakin Institute, Deakin University, 1 Gheringhap Street, Geelong, Vic. 3220, Australia. Email: [email protected] Accepted for publication 6 February 2008. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Research into reactance, however, has shown that the use of threat and legal authority, particularly when perceived as unreasonable, can produce the opposite behavior from that sought; these actions are more likely to result in non-compliance, creative compliance, criminal behavior or overt opposition (e.g. Bardach & Kagan 1982; Fehr & Rockenbach 2003; McBarnet 2003; Murphy 2004; Unnever et al. 2004). A number of researchers have therefore suggested that attitudes and moral obligations, in addition to economic calculations or fear of punishment, are important in explaining compliance behavior and need to be considered when managing and enforcing compliance (Ayres & Braithwaite 1992; Winter & May 2001). The core motivation of the accommodative view is not to punish an evil, but to repair the harm done from non-compliance and to secure future compliance (Black 2001). While research on the effectiveness of this approach is less common than research on the effects of deterrence, there is growing evidence to suggest that cooperative enforcement approaches increase compliance (Scholz 1991; Braithwaite & Makkai 1994; Scholz & Lubell 1998). According to Tyler (2006), people’s compliance behavior is strongly linked to their views about justice and injustice. He suggests that procedural justice plays an important role in people’s decisions to comply with rules and regulations. Tyler’s theory of compliance is related to the accommodative model of compliance in that it emphasizes persuasion and fair treatment of regulatees during regulatory encounters. It extends the traditional notion of the accommodative model, however, by showing that interpersonal relationships between individuals and authorities are important. Tyler’s theory does not rely solely on an instrumental version of cooperation (whereby a person or organization agrees to comply only when they perceive that a positive outcome is likely to result). Rather, his theory proposes that interpersonal relationships and fair treatment by a regulator are more important in nurturing voluntary compliance and deference to rules than a relationships that rely on an instrumental tit-for-tat strategy. Procedural justice – as defined by both Tyler (2006) and the definition that will be adopted in this study – concerns the perceived fairness of the procedures involved in decision-making and the perceived treatment one receives from the decision-maker. In other words, it relates to how a person may perceive the interpersonal treatment they have received from an authority, regardless of whether the resulting outcome will be favorable or not. Research into the effects of procedural justice has consistently found that people and organizations are much more likely to obey the law and accept decisions made by authorities when they feel that the decision-making procedures are fair, respectful, and impartial (e.g. Winter & May 2001; Murphy 2005a; Tyler 2006). They are also more likely to report wrongdoing to an authority that has treated them fairly (Feldman & Lobel 2008). Procedural justice has been hypothesized to be so effective in shaping compliance behavior because it increases the perceived legitimacy of an authority (Tyler 1997). Studies have shown that people who feel they have been fairly treated by an authority regard its authority status as more legitimate; and this has been found to be so regardless of the decision outcome (see Tyler 1997; Clawson et al. 2001; Reisig et al. 2007). Legitimacy in the procedural justice literature has usually been defined as the belief that authorities do their job well and are entitled to be obeyed. In other words, it is a judgment people make about the status of the organization itself as a legitimate authority. People feel that they ought to defer to legitimate decisions and rules, and follow them voluntarily out of obligation rather than out of fear of punishment or anticipation of reward (see also Black 2008). 2

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Legitimacy of authority versus legitimacy of law Political scientists often take a much broader view of legitimacy than has been studied to date in the procedural justice literature. For example, a number of political theorists have defined legitimacy as the belief within members of society that there are adequate reasons to voluntarily obey the commands of authorities (Easton 1958; Gerstein 1970; Lake 2006). We suggest that one of these “adequate reasons” could in fact refer to judgments about the fairness, validity, or appropriateness of the laws or regulations that an authority is enforcing. In other words, an authority itself may be seen to have legitimate authority, but the rules and laws it tries to enforce may be seen to be illegitimate. We argue that the distinction between the legitimacy of an authority (as usually defined in the procedural justice literature) and the legitimacy of the laws that an authority enforces is conceptually important, and should be considered in procedural justice research. We suggest that an equally important matter is whether procedurally fair treatment can be used to encourage cooperation and compliance with the law when people question the legitimacy of the rules or laws they are asked to obey. This alternative conceptualization of legitimacy also involves a consideration of the relationship of those rules and laws to a person’s moral or ethical values. We suggest that the rules and laws of an authority gain legitimacy when they are consistent with people’s moral values, and if one’s personal values are consistent with the law, cooperation and compliance will be voluntarily extended (see also McGraw & Scholz 1991; Burby & Paterson 1993; Levi 1997). Skitka (2002) has also found that deeply held moral beliefs can be more accurate than procedural fairness judgments in predicting acceptance of authority decisions that have threatened one’s moral views. Hence, just as values can coincide with the law, so too can law be undermined by contrary values (Tyler & Darley 2000). Some procedural justice theorists have also argued that procedural justice is inherently intertwined with acting in ways consistent with “ethicality” – the consistency of procedures with people’s “moral and ethical values” (Leventhal 1980, p. 45). However, while Leventhal (1980) included consistency with ethical values as an attribute of a just procedure, researchers have generally not considered people’s views about the morality of the laws or regulations themselves as being linked to evaluations of the justice of the procedure by which authority is exercised. Discussions on procedural justice usually separate compliance that flows from legitimacy, which is based upon procedural justice, from compliance based upon the congruence of rules or decisions with one’s moral values (Tyler & Darley 2000). Given no studies have yet attempted to systematically examine whether procedural justice can be used to encourage voluntary compliance in situations where the law is at odds with people’s moral values, the aim of the present study will be to explore this issue. Will procedural justice be more or less effective in such a situation? Valerie Braithwaite’s (2003) theory of social distancing may offer a useful theoretical framework for predicting how procedural justice may influence compliance behavior when people question the legitimacy of the laws they are being asked to obey. The OECD and a number of tax authorities around the world have incorporated Braithwaite’s theoretical framework into their regulatory compliance models as a means to understand compliance actions of taxpayers and for determining effective regulatory responses to compliance behavior (see Australian Taxation Office 1998; Hamilton 2003; New Zealand © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

3

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Inland Revenue 2001; UK Inland Revenue 2001, 2002). A growing number of researchers have also begun to explore how Braithwaite’s theory may contribute to our understanding of regulatory processes (see Harris & McCrae 2005; Murphy 2005b; Braithwaite et al. 2007; Hartner et al. 2008). While empirical evidence supporting Braithwaite’s theory of social distancing is still in its infancy, we believe it is a theory that offers some merit for further empirical examination. Braithwaite (2003) argues that individuals evaluate authorities in terms of what they stand for and how they perform, and that as such evaluations are made, revised, and shared with others over time, people develop a position in relation to the authority. A concept central to such positioning is social distance, which, as was originally conceived by Bogardus (1928), refers to the degree that individuals (or groups) have positive feelings for other individuals or groups and ascribe status to them. In the regulatory context, social distance relates to the liking one has for a regulator and the ascription of status to that regulatory authority. When people or groups decide how much they want to align themselves and be associated with an authority, or how much they want to remain at a distance from that authority, they are indicating the social distance they wish to place between themselves and the regulator.1 Braithwaite (2003) goes on to suggest that the social distance a regulatee places between themselves and an authority may be intuitive at first, but does not remain so for long. It is argued that individuals go on to articulate their beliefs, develop rationalizations for their feelings, and use values and ideologies to justify the way they position themselves in relation to the authority (Sykes & Matza 1957; Thurman et al. 1984; Bersoff 1999). These beliefs and attitudes are what Braithwaite calls motivational postures. In the context of taxation, for example, posturing captures the manner in which taxpayers see themselves as they relate to the tax system and the tax authority, and particularly the amount of social distance they wish to place between themselves and the tax authority. Braithwaite (1995, 2003) has shown that people can adopt several different motivational postures toward an authority. These postures are commitment, capitulation, resistance, and disengagement.2 The two postures that reflect an overall positive orientation to authority are commitment and capitulation. Commitment reflects beliefs about the desirability of a regulatory system and feelings of moral obligation to act in the interest of the collective and to obey the law with goodwill. Capitulation reflects acceptance of a regulator as an authority entitled to be obeyed. Those who adopt a posture of commitment or capitulation therefore place less social distance between themselves and the regulator and, according to Braithwaite (2003), are more inclined to comply with the law. Those who adopt a resistant or disengaged posture, in contrast, place greater social distance between themselves and the regulator, and have been shown to be less compliant with the law. Resistance reflects doubts about whether the regulator will act appropriately in any given circumstance, and provides the rhetoric for calling on others to be watchful, to fight for their rights, and to curb a regulator’s power. Finally, disengagement also communicates resistance, but it goes further as individuals adopting such a posture have moved beyond seeing any point in challenging authorities. The main objective of the disengaged is to keep both socially distant and to be blocked from view. In a sense, they have decided to step outside of the system. Braithwaite (2003) further argues that how people are treated by regulatory authorities during an encounter can change their motivational postures in either a positive or negative manner. Tyler (2006) argues that procedurally fair treatment conveys status and 4

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

communicates to people that they are valued members of society. We argue that harsh and insensitive treatment from an authority during an encounter is therefore likely to encourage further distancing between the two sides because regulatees see themselves as undervalued citizens. In fact, some criminological research has shown that regulators are more likely to use harsh punishment and enforcement strategies with people who have lower standing in the community, or who have weaker ties to the regulator (Black 1976; Kruttschnitt 1980; Grabosky & Braithwaite 1986). Braithwaite argues that if regulators are prepared to first engage in dialogue and fair treatment with those they regulate, then this will serve to encourage a more committed posture by the regulatee. We argue this occurs because people are more concerned with the treatment they receive from an authority than with the outcomes they may receive. In other words, procedural justice may be so effective at nurturing compliance because it serves to reduce the social distance individuals place between themselves and authorities. Empirical evidence to suggest that procedural justice can in fact reduce or change the social distance between a regulatee and regulator comes from a study conducted by Murphy (2005b). Using panel data obtained from a group of tax offenders, Murphy (2005b) found that resistance levels reduced over time if tax offenders had perceived their treatment by the tax authority over the previous two years to be procedurally fair. In another recently published study, Hartner et al. (2008) also found that procedural justice was related to taxpayers’ motivational postures. Taxpayers who felt they had received procedural justice from the tax authority were more likely to adopt postures of commitment and capitulation, whereas those who felt they had received procedural injustice were more likely to adopt postures of resistance and disengagement. Taken together, these findings add support to the suggestion that social distancing theory offers a useful framework in which to make predictions about the present study. In utilizing this theoretical approach to predict how people may respond in our study, we suggest that procedural justice may be particularly effective at nurturing compliancerelated behaviors among those who question the legitimacy of the law because this group places greater social distance between themselves and the regulator than those who do not question the law. Procedural justice is more likely to change their posture of disengagement or resistance to one of commitment, thereby in turn influencing their subsequent compliance behavior. In contrast, people who view the law as more legitimate to begin with will be more likely to comply with the law regardless of what treatment they receive. Given they are likely to be more committed to the system to begin with, procedural justice will be less likely to change their stance toward the authority. The present study The aim of the present study is to extend previous research that has explored the link between procedural justice, legitimacy, and compliance by examining the effect procedural justice has on compliance-related behaviors when people question the legitimacy of the underlying laws and the values that an authority is trying to enforce. Data from three studies will be presented. Study 1 (N = 652) will present data collected from tax offenders. Study 2 (N = 110) will present data collected from university students receiving social security benefits from the Australian government. Study 3 (N = 743) will examine the views of Australian citizens toward law enforcement officers. For all three contexts chosen, it should be noted that the relevant authority is charged with implementing and enforcing the law, not designing the law. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

5

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Across all studies, it is predicted that compliance will be higher when people perceive the treatment they receive from authorities as procedurally fair than when they perceive it to be procedurally unfair. We would expect this finding given the robust procedural justice effect observed in many previous studies (e.g. Tyler 2006). Second, based on research showing that compliance behavior is enhanced when rules and laws are consistent with one’s own moral and ethical views (e.g. Skogan & Frydl 2004), it is predicted that people who question the legitimacy of the laws they are being asked to comply with will exhibit lower levels of compliance overall than those who do not question the system. Finally, it is expected that compliance among those who question the legitimacy of laws will be affected more positively by procedural justice than for those who do not question the laws they are being asked to obey. Study 1: Taxation context The taxation context offers both an interesting and unique opportunity for compliance research. Taxpayer behavior on the surface appears to be dominated by financial selfinterest concerns, yet researchers have found that taxpayers also value and respond well to fair treatment from tax authorities (e.g. Scholz & Lubell 1998; Feld & Frey 2007). In fact, these studies have shown that procedural justice can be more important to taxpayers than financial self-interest concerns when predicting their compliance behavior. Exploring tax compliance behavior is also interesting because it is an area where few people share the same norms about tax compliance as those reflected in the law being enforced by the police (i.e. criminal law). For example, many people do not see low-level tax avoidance to be problematic (Braithwaite et al. 2001). Taxation is also a context where if people do not follow the rules, the excuses they make to rationalize their behavior are much easier to justify than if they were to break laws in other contexts. This makes managing the compliance behavior of taxpayers particularly challenging. Method Participants and procedure The 652 taxpayers who participated in Study 1 had been caught by the Australian Taxation Office (ATO) for engaging in illegal tax avoidance schemes. All schemes that were used by these taxpayers were financially structured in a similar way. Hence, the taxpayers in Study 1 form a relatively homogeneous group of offenders. After working with the ATO to obtain a stratified random sample of tax offenders (stratified by state and territory jurisdiction), the first author sent a nationwide sample of 1,250 tax offenders a 28-page survey. Non-respondents were followed up over time using an identification number that was affixed to each survey booklet, which was in turn linked to the sample name. A total of four mailings were made, and after a period of approximately three months, a total of 652 useable surveys were received. When adjusted for people whose address was incorrect, had died, or were incapable of completing the survey (N = 146), the response rate was 60%. Respondents in the final sample were between 25 and 76 years of age (M = 50.43, SD = 9.00), 83% were male, 46% had received a university education, and their average personal income was approximately AUD79,000. Using the limited amount of demographic information provided by the ATO (i.e. gender and state of residence), this sample was found to be representative of the overall tax offender population chosen. 6

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Measures Of interest to Study 1 are survey questions related to three variables: (i) procedural justice; (ii) perceived legitimacy of laws; and (iii) self-reported compliance behavior. Braithwaite’s (2003) motivational postures of commitment, capitulation, resistance, and disengagement were also assessed. Prior to developing the scales below, a factor analysis was first conducted to test for the assumed conceptual differentiation between the individual variables used to construct the procedural justice, legitimacy of laws, and compliance scales (for results see Appendix). As can be seen in the Appendix, no overlap between the constructed scales in any of the three studies was detected. All scales developed in Studies 1 to 3 were constructed by summing and then averaging individual questions that loaded together in the factor analyses. Table 1 presents the means, standard deviations, Cronbach alpha reliability coefficients, and bivariate correlations among the scales used in Study 1. As can be seen, the Cronbach alpha coefficients of each scale are quite high, indicating reliable scales. All items used to construct these scales were measured on a 1 (strongly disagree) to 5 (strongly agree) scale. Procedural justice. Taxpayers were asked three questions about the experience they had with the ATO during their enforcement experience. Taxpayers were asked whether the treatment they received from the ATO during the process had been fair, whether the procedures the ATO used were fair, and whether they had been given the opportunity to present their opinion over the matter (e.g. “How fair was the treatment you received from the ATO?”). Hence, the items assess the interpersonal treatment taxpayers received from the ATO. A higher score on this scale indicates greater perceptions of procedural justice. Perceived legitimacy of laws. Given the availability of survey questions, respondents’ moral values regarding tax evasion were used as a proxy measure for their perceptions about the legitimacy of the law; in other words, the questions assessed whether taxpayers’ moral values about tax evasion were at odds with the ATO’s tax laws. Taxpayers were asked three questions about their views regarding the cash economy and making false claims on tax returns (e.g. “Taxpayers should honestly declare cash earnings on their tax return?”). Taxpayers scoring lower on this scale were those more likely to question the legitimacy of the ATO’s laws. Self-reported compliance behavior. Taxpayers were asked a series of six questions about how they thought their experiences with the ATO had affected their taxpaying behavior (e.g. “I now try to avoid paying as much tax as possible”). All responses to the six items were reverse scored to form the tax compliance scale; a higher score indicates greater compliance. Motivational postures. A series of questions taken from Braithwaite (2003) were also used to assess the motivational postures of commitment, capitulation, resistance, and disengagement. The commitment scale comprised eight items (e.g. “Overall, I pay my tax with good will”), the capitulation scale six items (e.g. “The Tax Office is encouraging to those who have difficulty meeting their obligations through no fault of their own”), the resistance scale six items (e.g. “It’s impossible to satisfy the requirements of the Tax Office completely”), and the disengagement scale five items (e.g. “I don’t really know what the Tax Office expects of me and I’m not about to ask”). Higher scores on these scales indicate stronger endorsement for the postures. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

7

8

(0.79) 0.03 0.20 0.05 0.51*** -0.40*** -0.09*

1. 2. 3. 4. 5. 6. 7.

– (0.69) 0.34*** 0.32*** 0.07 -0.03 -0.32***

2 – – (0.80) 0.26*** 0.21*** -0.29*** -0.48***

3 – – – (0.84) 0.16*** -0.12*** -0.38***

4 – – – – (0.53) -0.52*** -0.13***

5

Figures in parentheses are Cronbach alpha reliability coefficients (all scales measured on a 1 to 5 scale). * P < 0.05; *** P < 0.001.

Procedural justice Legitimacy of laws Compliance Commitment Capture Resistance Disengagement

1

Scale

Table 1 Bivariate correlation coefficients among all scales used in Study 1: Taxation context

– – – – – (0.65) 0.15***

6

– – – – – – (0.61)

7

1.97 3.90 4.00 3.79 2.84 3.67 2.10

Mean

1.05 0.73 0.71 0.43 0.64 0.56 0.64

SD

K. Murphy et al. Procedural justice, legitimacy, and compliance

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Results In order to test whether procedural justice is effective in nurturing compliance with rules and decisions when taxpayers question the legitimacy of the underlying laws enforced by the ATO, a stepwise regression analysis was performed using “procedural justice” and “legitimacy of laws” as predictors of tax “compliance behavior”. The variables in all studies were centered prior to data analysis. Table 2 shows that both procedural justice and legitimacy have significant main effects on tax compliance behavior. These findings indicate that taxpayers are less likely to comply with their taxation obligations when (i) they feel they have been treated in a procedurally unfair manner, and (ii) when they question the legitimacy of the laws they are being asked to obey. Confidence intervals were constructed around both main effects yielding lower and upper limits of CI95% = [0.08, 0.18] for procedural justice, and CI95% = [0.23, 0.37] for legitimacy of laws, respectively. More importantly, the interaction between procedural justice and legitimacy was also found to be significant. The interaction is depicted graphically in Figure 1. To illustrate the meaning of the interaction effect further, we calculated simple slope effects of procedural justice at -1 and +1 standard deviation of legitimacy in the manner recommended by Aiken and West (1991). Although the compliance levels for those who question the legitimacy of the ATO’s underlying laws are lower overall, the interaction shows that procedural justice appears to be more effective at increasing compliance levels for taxpayers who question the legitimacy of the ATO’s underlying laws. In other words, compliance was much higher among those taxpayers who questioned the legitimacy of the ATO’s laws when they believed the ATO treated taxpayers fairly than when they believed the ATO treated taxpayers unfairly (B = 0.18, SEB = 0.04, P < 0.001; CI95% = [0.11, 0.25]). In contrast, procedural justice had a much weaker effect on compliance levels when taxpayers did not question the legitimacy of the ATO’s laws (B = 0.07, SEB = 0.04, P < 0.04; CI95% = [0.00, 0.14]). In other words, one’s perceptions of the legitimacy of the law appears to moderate the effect of procedural justice on compliance behavior. As noted in the Introduction, we might expect procedural justice to shape compliance more so among those who question the legitimacy of the law because procedural justice

Table 2 Stepwise regression analysis using “procedural justice” and “legitimacy of laws” as predictors of self-reported “tax compliance” behavior Predictors

(Constant) Procedural justice Legitimacy of laws PJ ¥ Leg R2 Adjusted R2 R2 change F change d.f.

Step 1

Step 2

Step 3

B

SEB

B

SEB

B

SEB

4.00*** 0.13*** – – 3.8% 3.6% 3.8% 23.99*** 1, 614

0.03 0.03 – – – – – – –

4.00*** 0.12*** 0.31*** – 14.2% 13.9% 10.4% 74.45*** 1, 613

0.03 0.03 0.04 – – – – – –

4.00*** 0.13*** 0.30*** -0.07* 14.8% 14.3% 1.0% 4.17* 1, 612

0.03 0.03 0.04 0.04 – – – – –

Predictor entries are unstandardized regression coefficients (B). * P < 0.05; *** P < 0.001. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

9

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Self-reported tax compliance

5

Low legitimacy High legitimacy

4.5

4

3.5

3

Low

High

Procedural justice

Figure 1 Study 1. Compliance with taxation obligations as a function of taxpayers’ views of Tax Office treatment (low vs. high procedural justice) and perceived legitimacy of laws (low vs. high).

encourages them to move from a posture of defiance to one of commitment. If we are to use Braithwaite’s theory as the basis for making this prediction, then we should at least expect to see that those who question the legitimacy of the law actually place more social distance between themselves and the regulator to begin with than those who do not question the law. Second, we would also expect to see that procedural justice is positively related to the motivational postures of commitment and capitulation, but negatively related to resistance and disengagement. Finally, we might also expect to see that (i) procedural justice and legitimacy interact together to predict motivational postures in a similar way as they do for compliance, and (ii) the social distance one places between themselves and the regulator mediates the interaction effect between procedural justice and legitimacy on compliance. As can be seen from the bivariate correlations presented in Table 1, those who questioned the legitimacy of the law were less likely to adopt a posture of commitment, and were more likely to adopt a posture of disengagement. Similarly, procedural justice was positively related to the more committed postures, but negatively associated with the defiant postures, suggesting that procedural justice may make one more committed to and less disengaged from the tax system. A regression analysis further confirmed this. As can be seen in Table 3, the interaction between procedural justice and legitimacy of laws on the motivational posture of commitment was found to be significant. Specifically, the interaction shows that procedural justice is more effective at increasing commitment levels for taxpayers who question the legitimacy of the law. In contrast, procedural justice has a weaker effect on commitment levels when taxpayers do not question the legitimacy of the law. Hence, the assumption that those who question the legitimacy of the law may be more likely to have procedural justice affect their motivational postures in a positive way seems plausible. Finally, Table 4 reveals that the motivational posture of “commitment” partially mediates the interaction effect between procedural justice and legitimacy on compliance. It can be seen that once the “commitment” measure was entered into the regression model at Step 2, the interaction between procedural justice and legitimacy on compliance was 10

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Table 3 Stepwise regression analysis using “procedural justice” and “legitimacy of laws” as predictors of “commitment” Predictors

Step 1 B

(Constant) Procedural justice Legitimacy of laws PJ ¥ Leg R2 Adjusted R2 R2 change F change d.f.

3.79*** 0.02 0.20***

Step 2 SEB

B

SEB

0.02 0.02 0.02

3.79*** 0.02 0.19*** -0.05* 12.8% 12.4% 1.0% 6.21* 1, 614

0.02 0.02 0.02 0.02

12.0% 11.7% 12.0% 41.77*** 2, 615

Predictor entries are unstandardized regression coefficients (B). * P < 0.05; *** P < 0.001. Table 4 Stepwise regression analysis exploring the meditational role of “commitment” in the “procedural justice,” “legitimacy of laws,” and “tax compliance” relationship Predictors

(Constant) PJ ¥ Leg Commitment R2 Adjusted R2 R2 change F change d.f.

Step 1

Step 2

B

SEB

B

SEB

4.00*** -0.12**

0.03 0.04

2.43*** -0.08* 0.42*** 7.5% 7.2% 6.0% 39.72*** 1, 613

0.25 0.04 0.07

1.5% 1.3% 1.5% 9.29** 1, 614

Dependent variable is tax compliance. Predictor entries are unstandardized regression coefficients (B). * P < 0.05; ** P < 0.01; *** P < 0.001.

reduced. This partial mediation effect was confirmed via a Sobel test, which revealed that “commitment” did partially mediate the effect of the interaction on tax compliance behavior, z = -2.35, P < 0.01. This finding is important as it further suggests that procedural justice might be more important in shaping compliance for those who question the legitimacy of the law because procedural justice reduces the amount of social distance people place between themselves and an authority. For simplicity, only the motivational posture of commitment was examined in detail here.

Study 2: Social security context The Australian social security context was chosen for the purposes of Study 2 for two reasons. First, there have been no published studies to date that have examined the effects of procedural justice and perceived legitimacy on compliance behavior in the social © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

11

K. Murphy et al.

Procedural justice, legitimacy, and compliance

security context. Second, figures show that welfare fraud is quite common in Australia. For example, each year Centrelink (Australia’s social security provider) prosecutes thousands of people in Australia for engaging in welfare fraud. Between 1 July 2004 and 30 June 2005 there were 3,446 convictions of welfare fraud involving $41.22 million in debt. Furthermore, a review of Centrelink customers between 1 July 2004 and 30 June 2005 identified a non-compliance rate of approximately 14 per cent (Murphy 2005c). Given the present study was interested in compliance behavior, as well as how people view the legitimacy of welfare laws, selecting a context that may provide a reasonable chance of sampling people who question the system and do not comply seemed prudent. Method Participants and procedure Survey data in Study 2 were collected from university students. The general procedure for recruiting participants was to approach them randomly on two Australian university campuses. Prior to participating in the study the students were asked by the third author if they were currently receiving social security benefits. If they responded yes, they were asked to complete a 15-minute survey. Participants who completed surveys were reimbursed $5 for their time. Of the eligible students approached only two refused to participate. A total of 111 participants completed a survey. However, one participant was excluded from further analyses as they indicated in their survey that they had never received a social security benefit. Hence, they were not eligible for the study. The final sample of respondents was aged between 18 and 33 years of age (M = 22.26, SD = 3.27); 51% were female and 90% were born in Australia. The majority of respondents (69%) received Youth Allowance benefits from Centrelink, as opposed to other types of benefits.3 The average amount of benefits received per week from Centrelink was approximately AUD179 (SD = AUD51). Measures Table 5 presents the means, standard deviations, Cronbach alpha reliability coefficients, and bivariate correlations among the scales used in Study 2. All items used to construct these scales were measured on a 1 (strongly disagree) to 5 (strongly agree) scale, and scales were constructed by summing and averaging the scores for the relevant items in each scale. Again, the Cronbach alpha coefficients reveal that the scales used to tap the concepts of interest were robust. Unfortunately, the social security survey did not measure Braithwaite’s (2003) motivational postures.

Table 5 Bivariate correlation coefficients among all scales used in Study 2: Social security context Scale

1

2

1. Procedural justice 2. Legitimacy of laws 3. Compliance

(0.84) 0.41*** 0.48***

(0.71) 0.47***

3

Mean

SD

(0.73)

2.99 2.77 3.26

0.95 0.71 0.71

Figures in parentheses are Cronbach alpha reliability coefficients (all scales measured on a 1 to 5 scale). *** P < 0.001. 12

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Procedural justice. The three-item procedural justice scale measured respondents’ views of the quality of interpersonal treatment they received from Centrelink. Respondents were asked about whether their Centrelink caseworker treated them politely, with respect, and showed respect for their rights (e.g. “Centrelink staff treat people with respect and dignity”). A higher score on this scale indicates greater perceptions of procedural justice. Perceived legitimacy of laws. The legitimacy of laws scale was measured via five items that tapped into the perceived legitimacy of the underlying laws, rules, and policies of Australia’s welfare system. Students were asked directly if they questioned the legitimacy of Centrelink’s laws, whether the welfare laws were consistent with the views of Australians, and whether they believed the welfare system worked well (e.g. “I question the legitimacy of Centrelink’s underlying laws”). A higher score on this scale indicates students see Centrelink’s laws and policies to be more legitimate. Self-reported compliance behavior. Given the sample of university students who participated in the study did not come from an offender population, but instead came from the general population, compliance behavior was measured as the degree of defiance students exhibited toward Centrelink (e.g. “I tend to be defiant towards Centrelink”). Responses to all five items in the scale were reverse scored, summed, and averaged to create the compliance scale. A higher score therefore indicates students are more compliant. Results Like in Study 1, the question of interest was whether procedural justice positively influences compliance when people question the legitimacy of the underlying laws they are being asked to obey. As can be seen in Table 6, both “procedural justice” and “legitimacy of laws” were found to have significant main effects on compliance behavior in the direction predicted. Confidence intervals were constructed around both main effects yielding lower and upper limits of CI95% = [0.12, 0.39] for procedural justice, and CI95% = [0.17, 0.49] for

Table 6 Stepwise regression analysis using “procedural justice” and “legitimacy of laws” as predictors of “compliance” behavior in the social security context Predictors

Step 1 B

(Constant) Procedural justice Legitimacy of laws PJ ¥ Leg R2 Adjusted R2 R2 change F change d.f.

3.25*** 0.36***

Step 2 SEB 0.06 0.07

23.3% 22.6% 23.3% 31.36*** 1, 103

B 3.26*** 0.26*** 0.31*** 31.9% 30.6% 8.6% 12.88*** 1, 102

Step 3 SEB

B

SEB

0.06 0.07 0.08

3.29*** 0.26*** 0.33*** -0.12* 34.5% 32.5% 2.6% 3.95* 1, 101

0.06 0.07 0.08 0.08

Predictor entries are unstandardized regression coefficients (B). * P < 0.05; *** P < 0.001. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

13

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Social security compliance

5

Low legitimacy High legitimacy

4.5

4

3.5

3

2.5

2

Low

High

Procedural justice

Figure 2 Study 2. Social security compliance as a function of students’ views of Centrelink treatment (low vs. high procedural justice) and perceived legitimacy of laws (low vs. high).

legitimacy of laws. Consistent with Study 1, the interaction between procedural justice and legitimacy of laws was also found to be significant (see Fig. 2). Simple slope analyses showed that compliance levels for those who questioned the underlying laws of Centrelink were lower overall than those who did not question the legitimacy of Centrelink’s laws. The interaction indicates that procedural justice appears to be more effective in nurturing compliance levels for students who question the legitimacy of the law; procedural justice had no effect on shaping compliance behavior when the legitimacy of Centrelink’s laws was seen to be high (B = 0.14, SEB = 0.09, P = ns; CI95% = [-0.05, 0.32]), but procedural justice significantly affected compliance levels in a positive way when the legitimacy of laws was seen to be low (B = 0.38, SEB = 0.09, P < 0.001; CI95% = [0.21, 0.56]). This pattern of results replicates those obtained in Study 1. Study 3: Law enforcement context The findings reported in both Study 1 and 2 indicate that people who question the legitimacy of the underlying laws enforced by a regulator are more likely to respond positively to fair treatment than those who do not question the legitimacy of the underlying laws. Study 3 was conducted to ascertain whether similar findings could also be found in the law enforcement context. More specifically, Study 3 asks people who have had recent contact with a police officer to comment about their experience. Method Participants and procedure In 2007, 5,700 surveys were posted to a stratified random sample of Australian citizens (stratified by state and territory jurisdiction). The 18-page survey was designed to assess citizens’ perceptions of crime, safety, and policing in their community. Participants were chosen from the publicly available electoral roll. Three reminders were posted to nonrespondents during the survey fielding period, and a total of 2,120 completed surveys were returned. When adjusted for respondents who did not live at the address listed, or who were incapable of participating (N = 432), a response rate of 40% was obtained. 14

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Respondents in the final sample were between 14 and 98 years of age (M = 51.48, SD = 16.17),4 46% were male, 71% identified their main ethnic or national group background to be Australian, 72% of respondents were married, 60% had attained a tertiary qualification, and the average family income was reported to be AUD79,120 (SD = AUD53,510). Using 2006 Australian Census data, the sample was found to be broadly representative of the overall Australian population. However, like many mail surveys, those who are older and more educated tended to be over-represented. Men were also slightly under-represented in the survey. Among the 2,120 respondents were 743 who indicated they had a personal experience with a police officer at least once in the year prior to completing the survey. These 743 respondents are the focus of the following analysis. Hence, across all three studies reported in this article, all respondents had had direct recent contact with the relevant authority. Measures Table 7 presents the means, standard deviations, Cronbach alpha reliability coefficients, and bivariate correlations among the scales used in Study 3. All items used to construct the scales were measured on a 1 (strongly disagree) to 5 (strongly agree) scale. Once again, the Cronbach reliability coefficients for each scale revealed that the scales used in Study 3 were reliable. Procedural justice. In Study 3, the procedural justice scale was constructed using three items. Like in Study 2, respondents were asked whether the police were polite, whether they treated people with dignity and respect, and whether they tried to be fair when dealing with the public (e.g. “Police treat people with dignity and respect”). Those scoring higher on this scale were more likely to believe that the police officer used procedural justice when dealing with them. Perceived legitimacy of laws. The two-item legitimacy of laws scale was designed to assess whether citizens questioned the legitimacy of some of the laws the police are charged with enforcing (e.g. “My own feelings about what is right and wrong usually agree with the rules and laws enforced by the police”). Those who scored lower on the scale were deemed to be those who questioned the legitimacy of the laws enforced by the police. Self-reported compliance behavior. Compliance in Study 3 was measured using a four-item cooperation scale. Given that the chosen sample came from the general population, and not from an offender group, self-reported willingness to cooperate with the police was seen to be a more appropriate proxy for compliance behavior, especially given the importance of public cooperation to the successful policing of crime and disorder problems (Murphy et al. 2008). Respondents were asked four questions about their willingness to help or cooperate with police to prevent crime (e.g. “How likely would you be to willingly assist police if asked?”). Those scoring higher on this scale were more cooperative. Motivational postures. Braithwaite’s (2003) motivational postures were also measured. Her items in the taxation context were taken and adapted here for use in the law enforcement context. The commitment scale comprised five items (e.g. “Overall, I obey the police with good will”), the capitulation scale four items (e.g. “If someone mistakenly breaks the law, the police will show them understanding”), the resistance scale six items © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

15

16

(0.73) 0.35*** 0.32*** 0.43*** 0.56*** -0.47*** -0.35***

1. 2. 3. 4. 5. 6. 7. (0.78) 0.20*** 0.41*** 0.34*** -0.25*** -0.31***

2

(0.88) 0.40*** 0.26*** -0.25*** -0.32***

3

(0.83) 0.49*** -0.35*** -0.55***

4

(0.58) -0.30*** -0.34***

5

Figures in parentheses are Cronbach alpha reliability coefficients (all scales measured on a 1 to 5 scale). *** P < 0.001.

Procedural justice Legitimacy of laws Cooperation Commitment Capture Resistance Disengagement

1

Scale

Table 7 Bivariate correlation coefficients among all scales used in Study 3: Law enforcement context

(0.67) 0.47***

6

(0.74)

7

3.43 3.93 4.39 4.34 3.58 3.10 2.14

Mean

0.66 0.68 0.65 0.52 0.59 0.57 0.61

SD

K. Murphy et al. Procedural justice, legitimacy, and compliance

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

(e.g. “It is impossible to always obey the law completely”), and the disengagement scale five items (e.g. “I don’t care if I am not doing the right thing by police”). Results The findings of Study 3 replicate those of Studies 1 and 2. Table 8 shows that procedural justice significantly predicts citizen’s willingness to cooperate with police. Like in the previous two studies presented, this finding also suggests that, in general, treating people in a procedurally fair way will improve their compliance-related behaviors. Table 8 also shows that legitimacy had a significant effect on cooperative behavior, indicating that citizens are generally more willing to be cooperative with police when they believe the underlying laws or values enforced by the police are legitimate. Confidence intervals were constructed around both main effects yielding lower and upper limits of CI95% = [0.20, 0.35] for procedural justice, and CI95% = [0.02, 0.16] for legitimacy of laws, respectively. From the significant interaction effect depicted in Figure 3 it can also be seen that citizens are particularly unlikely to want to cooperate with the police when they question the legitimacy of the laws they enforce, and when they feel they have been treated unfairly by the police. Simple slope analyses revealed that procedural justice always had a significant influence upon cooperation, but that it had a stronger effect on cooperation when people questioned the legitimacy of the law (B = 0.35, SEB = 0.04, P < 0.001; CI95% = [0.26, 0.43]). Even though people questioned the laws they were being asked to obey, they were much more likely to want to cooperate with the police if they felt the police had treated them with procedural fairness. Procedural justice also significantly affected cooperative behavior in a positive way for those who viewed the law as legitimate (B = 0.21, SEB = 0.05, P < 0.001; CI95% = [0.10, 0.31]), but the influence was slightly weaker. In other words, cooperative gestures were higher among citizens who viewed the law as less legitimate when they felt the police treated them fairly, than when they felt the police treated them unfairly. Finally, like in Study 1, Study 3 attempted to examine empirically whether Valerie Braithwaite’s social distancing theory can offer a plausible theory with which to explain the findings. As can be seen from the bivariate correlations presented in Table 7, those Table 8 Stepwise regression analysis using “procedural justice” and “legitimacy of laws” as predictors of “willingness to cooperate” with police Predictors

Step 1 B

(Constant) Procedural justice Legitimacy of laws PJ ¥ Leg R2 Adjusted R2 R2 change F change d.f.

4.39*** 0.33***

Step 2 SEB 0.02 0.04

10.7% 10.5% 10.7% 83.72*** 1, 701

B 4.39*** 0.29*** 0.10** 11.6% 11.3% 1.0% 6.99** 1, 700

Step 3 SEB

B

SEB

0.02 0.04 0.04

4.40*** 0.28*** 0.09** -0.10* 12.3% 11.9% 1.0% 6.02* 1, 699

0.02 0.04 0.04 0.04

Predictor entries are unstandardized regression coefficients (B). * P < 0.05; ** P < 0.01; *** P < 0.001. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

17

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Willingness to cooperate with police

5

Low legitimacy High legitimacy

4.5

4

3.5

Low

High

Procedural justice

Figure 3 Study 3. Willingness to cooperate with the police as a function of citizens’ views of police treatment (low vs. high procedural justice) and perceived legitimacy of laws (low vs. high).

who question the legitimacy of the law are more likely to adopt postures of resistance and disengagement. They are also less likely to hold the posture of commitment or capitulation, suggesting that this group is more likely to place a greater amount of social distance between themselves and the police. It can also be seen that procedural justice is positively related to both commitment and capitulation, but negatively related to resistance and disengagement. These findings again suggest that procedural justice can be used to shape the social distance people place between themselves and authority. However, unlike in Study 1, neither did the interaction between procedural justice and legitimacy of laws on the motivational posture of commitment reach significance, nor did the posture of commitment mediate the effect of the interaction on compliance behavior. The failure to find these effects in Study 3 can be easily explained if we examine the mean level of commitment observed among citizens. As can be seen in Table 7, people reported being highly committed to the police. The failure to find a significant interaction could therefore simply be the result of a ceiling effect; there was no room using this scale to show an effect. Similarly, this scaling effect could have influenced the mediation effect of commitment. While Study 1 provides convincing evidence of the importance of social distancing to predicting whether procedural justice will be effective or not in nurturing compliance, the inconclusive results obtained in Study 3 suggest that further research will need to be conducted to ascertain whether Braithwaite’s theory can hold up over a number of different contexts. What is conclusive from all three studies, however, is the finding that one’s perception of the legitimacy of the law moderates the effect of procedural justice on compliance behavior. Discussion Across all three studies presented, procedural justice was found to be more important for nurturing compliance when people questioned the legitimacy of the laws they were being asked to comply with. The fact that a similar pattern of results was found across three regulatory contexts, and for three different population groups (i.e. tax offenders, students, and general population), attests to the robustness and reliability of the findings. 18

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

The findings suggest first that legitimacy is a much more complex concept than has previously been recognized by procedural justice scholars, and the findings suggest that legitimacy can interact differently with procedural justice to produce different compliance outcomes depending on how legitimacy is conceptualized and measured. The pattern of results obtained is also noteworthy when compared with previous procedural justice research. A significant number of studies have found that procedural justice is usually more effective in changing behavior for those whose outcomes have been negative, as opposed to positive (for a review of this research see Brockner & Wiesenfeld 1996). In the present study, the legitimacy of laws refers to whether or not one agrees with the values that are supposed to be implemented and complied with. It is about agreement with those values, the perception that the values are appropriate, right, and ethical. For example, if someone agreed with the value of freedom from others harming one’s health, then they would probably agree with, and find appropriate and fair, the decision to ban smoking in restaurants – even if they were a smoker themselves. Put another way, if individuals question the legitimacy of a law then they are indicating that that law goes against their own personal beliefs and values. Being asked to comply with such a law, therefore, is likely to be seen to be unfavorable to such people. Thus, agreement with values and laws seems similar to the perceived appropriateness or fairness of outcomes. The pattern of findings obtained in the present article could therefore be seen as a variant of this well-established pattern and further contributes to our theoretical understanding of procedural justice effects. The findings of the present study also support the suggestion that a theory of social distancing may offer a useful framework in which to study procedural justice effects on compliance. In applying Braithwaite’s (2003) framework to the present study, it was suggested that procedural justice should have a greater effect on shaping compliancerelated behaviors for those who question the legitimacy of the law because they place more social distance between themselves and the regulator. And, indeed, the findings support this contention. Procedural justice does appear to be more effective at shaping compliance behaviors among those who question the legitimacy of the law. We suggest that this is because people who value the laws they are obeying and see those laws as legitimate are more likely to comply with the law regardless of what treatment they receive. Given they are likely to be more committed to “the system” to begin with (see bivariate correlations in Tables 1,7), procedural justice is less likely to change their stance toward the authority. In other words, there is little room to improve the social distance between the two sides. In contrast, for those who question the legitimacy of the laws they are being asked to obey, the results presented in this study suggest that it is plausible that procedural justice can be used with these people to improve the social distance they place between themselves and a regulator, which in turn influences their compliance behavior (see Tables 3,4). We suggest this occurs because procedural justice communicates important information to individuals that they are valued and respected members of the community. While the discussion presented here is framed by individual compliance with laws, it should be noted that regulation also concerns compliance from firms and other organizations. It would perhaps not be unreasonable to expect that the findings reported in this study may also be generalizable to the behavior exhibited by organizations for the following reasons. First, the legitimacy of the rules and laws that organizations are expected to comply with could also be seriously challenged by particular firms. Second, the regu© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

19

K. Murphy et al.

Procedural justice, legitimacy, and compliance

latory literature also contains examples of firms who choose to position themselves at a distance from regulatory authorities, while others place little social distance between themselves and regulators (e.g. see Braithwaite et al.’s (2007) research in the nursing home context). Third, the procedural justice literature is also full of studies examining the role that procedural justice plays in shaping organizational behavior; it has generally been found that when trying to gain compliance from organizations, compliance will be greater if the regulator has used procedural justice in their dealings with the organization (e.g. see Winter & May 2001). But of course, further empirical research specifically addressing this issue would have to be conducted to see whether the results of the present study are generalizable at the organizational level. Implications for regulatory enforcement models The findings of the present study also have wider implications for the area of regulatory enforcement. The aim of regulatory enforcement is to gain future compliance behavior from non-compliers. At the same time, however, enforcement practices should not alienate those they come into contact with, nor should they produce a culture that facilitates the sharing of knowledge about methods of legal resistance and counter-attack (see Bardach & Kagan 1982). The question of how regulators can best promote long-term voluntary compliance with the spirit of the law is therefore important. This study has been able to provide further evidence to the growing body of literature that recommends regulators use an accommodative approach to regulating behavior. Specifically, we have shown that the interpersonal treatment one receives from a regulator during an enforcement encounter can effectively shape compliance behavior, and this is even more important for those who may question the legitimacy of the laws they are being asked to obey. There is often the perception among regulators that individuals will comply with an authority’s rules and decisions only when confronted with harsh sanctions and penalties (Kagan & Scholz 1984). Many authorities also believe that when dealing with a “difficult customer,” a hard line and aggressive stance will exert power, authority, and legitimacy, and will therefore be more effective in bringing people into compliance. The present study has shown that an accommodative approach that relies on treating people with respect and dignity can be effective, perhaps even more effective than a strategy that relies on deterrence. But how might a regulator go about ensuring that people view their treatment to be procedurally fair? In contexts where regulators need to engage with thousands or millions of people, automated procedures are essential for processing the volumes of documents and data that flow through the system. Here, procedural justice cannot be practiced routinely on a one-to-one basis as it is in other fields. Research conducted in the Australian taxation context shows that the tone of language and the information communicated to offending taxpayers can have a major role in shaping their behavior; those non-compliers who received letters from the tax office emphasizing procedural justice were less likely to complain and were subsequently more compliant with tax office demands than were those who received the standard tax office letter that made penalties salient (see Wenzel 2002, 2006). Hence, changing communication strategies with noncompliers is one way in which procedural justice can be used in practice in contexts that do not provide for face-to-face contact between the regulator and regulatee. In the context of face-to-face encounters, the challenge for regulators is perhaps easier than for those who deal with thousands from a distance. Here, regulators should make a commit20

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

ment to treating individuals with respect and dignity during a regulatory encounter, and provide citizens with the opportunity to present their side of the story before a decision is reached (see Braithwaite & Makkai [1994]) for evidence that such an approach is effective). Studies have therefore shown empirically that authorities can use procedural justice effectively and, more importantly, can tailor their strategies to ensure that all members of the public receive procedural justice. The present study has several important limitations that should be noted and taken into account when interpreting the findings. First, there are limitations related to the use of cross-sectional survey data. As is the case with all cross-sectional survey studies, the causal relationships between variables of interest are possibly obscured. Only correlational relationships between variables of interest can be ascertained. Future research should therefore attempt to examine the proposed mechanisms over time. Second, selfreport measures of compliance or willingness to cooperate were used across all studies. A method that relies on the honesty of the surveyed participants to disclose dishonest behavior obviously presents risk to a study’s validity. However, participants were made aware their responses would be kept confidential, and a strong tradition of research in criminology supports the validity of using self-report data in such circumstances (Thornberry & Krohn 2000; Maxfield & Babbie 2008). Third, in Study 1 the procedural justice and legitimacy scales were uncorrelated. However, in studies 2 and 3 the two measures correlated quite highly together, suggesting there may be an issue with construct overlap between the two measures. However, although the correlations were not excessively high, the factor analyses revealed separate constructs, and the collinearity statistics did not reveal a problem – the findings should still be interpreted with this in mind. Fourth, previous research has shown strong links between individuals’ perceptions of the legitimacy of authority, authority motivations, and authority performance and their likelihood of complying with laws and regulations. In our study we only examined the effect of two variables on compliance: procedural justice and perceived legitimacy of laws. Our aim for including only such a limited subset of variables was to ascertain whether these variables interacted together to affect compliance. It is possible that similar effects may not be observed after the addition of other key variables. Future research should therefore attempt to examine whether the same relationships can be replicated when other variables are included in the model.5 Finally, as already mentioned earlier, it is possible that the findings are somewhat influenced by a scaling effect. Across all three studies, compliance levels among those people who had high perceptions of the legitimacy of the law were particularly high, even when the perceived treatment they received from the authority was seen to be procedurally unfair. It is therefore possible that a ceiling effect could have masked a stronger effect for procedural justice for this particular group of people. In other words, perhaps if compliance levels had not been close to ceiling levels, an interaction between procedural justice and legitimacy would not have been observed. Future research may wish to select people who have particularly low levels of compliance to ascertain whether the same results can be replicated. Conclusion Although several limitations have been identified, these do not detract from the importance of the findings from this study, which evidently have a number of important implications for justice research and regulatory policy. This study has advanced the © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

21

K. Murphy et al.

Procedural justice, legitimacy, and compliance

literature on procedural justice by demonstrating that perceptions of legitimacy of laws can moderate the effect of procedural justice on compliance and cooperative behaviors. Specifically, procedural justice was found to have a greater effect in nurturing compliance among those who questioned the legitimacy of the law. Such findings suggest that procedural justice should always be used by regulators in their dealings with regulatees (whether they be difficult or easy “customers,” whether they be individuals or firms, or whether this treatment is done in the context of a face-to-face encounter or through an automated process). If procedural justice is used routinely by authorities, their actions will go a long way toward denying an offender the grounds for complaint, and will nurture long-term voluntary compliance with laws and decisions, even when the legitimacy of those laws and decisions is called into question. Acknowledgments The present research was supported by the Australian Research Council (Discovery Grants DP0666337 and DP0987792). Data presented in Study 1 were collected by the first author while she was employed at the Regulatory Institutions Network (RegNet), The Australian National University. Data presented in Study 3 were also partially funded out of an Australian Research Council Linkage Grant (LP0346987) held by Professor Peter Grabosky of RegNet. The authors wish to acknowledge the funding support of both RegNet and the Australian Research Council. Notes 1 Black (1976) has used the term “relational distance” to describe the social distance authorities place between themselves and those they govern. In Braithwaite’s view of the concept, social distance is used to represent the regulatee’s perspective. 2 A fifth posture of game-playing has been identified in the taxation context (see Braithwaite 2003). 3 Youth Allowance is a benefit paid to full-time Australian students aged 16 to 24. Eligibility for the benefit is usually based on various factors, such as a student’s living arrangements, income level, level of financial support provided by parents, and relationship status. 4 Only one respondent was younger than 18 years of age, suggesting that this respondent completed a survey that was not addressed to them personally. 5 It should be noted that three additional regression analyses not reported in this study were conducted. Each included an additional measure assessing the “perceived legitimacy of the authority” of interest. This item was entered along with the other measures into the regression model at Step 2. It was found that across all three studies, the legitimacy of the law and the legitimacy of the authority measures each predicted compliance behavior independently from the other. More importantly, in Study 1 and Study 3 the interaction effect between procedural justice and perceptions of the legitimacy of the law was still observed. Future research should attempt to further tease apart the different effects these two variables have on compliance.

References Aiken L, West S (1991) Multiple Regression: Testing and Interpreting Interactions. Sage, Newbury Park, CA. Australian Taxation Office (1998) Improving Tax Compliance in the Cash Economy. Cash Economy Task Force, Australian Taxation Office, Canberra. 22

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Ayres I, Braithwaite J (1992) Responsible Regulation: Transcending the Deregulation Debate. Oxford University Press, New York. Bardach E, Kagan R (1982) Going by the Book: The Problem of Regulatory Unreasonableness. Temple University Press, Philadelphia. Bersoff DM (1999) Why Good People Sometimes Do Bad Things: Motivated Reasoning and Unethical Behavior. Personality and Social Psychology Bulletin 25, 28–39. Black D (1976) The Behavior of Law. Academic Press, San Diego. Black J (2001) Managing Discretion. Paper presented at the Australian Law Commission Conference on ‘Penalties: Policies and Practice in Government Regulation’, Jun 2001, Sydney. Black J (2008) Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes. Regulation and Governance 2, 137–164. Bogardus ES (1928) Immigration and Race Attitudes. DC Heath and Company, Boston. Braithwaite J, Makkai T (1994) Trust and Compliance. Policing and Society 4, 1–12. Braithwaite J, Makkai T, Braithwaite V (2007) Regulating Aged Care: Ritualism and the New Pyramid. Edward Elgar, Cheltenham. Braithwaite V (1995) Games of Engagement: Postures within the Regulatory Community. Law and Policy 17, 225–255. Braithwaite V (2003) Dancing with Tax Authorities: Motivational Postures and Non-compliant Actions. In: Braithwaite V (ed) Taxing Democracy, pp. 15–40. Ashgate, Aldershot. Braithwaite V, Reinhart M, Mearns M, Graham R (2001) Preliminary Findings from the Community Hopes, Fears and Actions Survey. Centre for Tax System Integrity Working Paper No. 3. The Australian National University, Canberra. Brockner J, Wiesenfeld BM (1996) An Integrative Framework for Explaining Reactions to Decisions: Interactive Effects of Outcomes and Procedures. Psychological Bulletin 120, 189– 208. Burby R, Paterson R (1993) Improving Compliance with State Environmental Regulations. Journal of Policy Analysis and Management 12, 753–772. Clawson R, Kegler E, Waltenberg E (2001) The Legitimacy-conferring Authority of the US Supreme Court. American Political Research 29, 566–651. Easton D (1958) The Perception of Authority and Political Change. In: Friedrich CJ (ed) Authority, pp. 170–196. Harvard University Press, Cambridge, MA. Fehr E, Rockenbach B (2003) Detrimental Effects of Sanctions on Human Altruism. Nature 422, 137–140. Feld LP, Frey BS (2007) Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation. Law and Policy 29, 102–120. Feldman Y, Lobel O (2008) Decentralized Enforcement in Organizations: An Experimental Approach. Regulation and Governance 2, 165–192. Gerstein R (1970) The Practice of Fidelity to the Law. Law and Society Review 4, 479–493. Grabosky P, Braithwaite J (1986) Of Manners Gentle: Enforcement Strategies of Australian Business Regulatory Agencies. Oxford University Press, Melbourne. Hamilton S (2003) Putting the Client First: The Emerging Copernican Revolution of Tax Administration. Tax Notes International 29, 569–576. Harris N, McCrae J (2005) Perceptions of Tax and Participation in the Cash Economy: Examining the Role of Motivational Postures in Small Businesses. Centre for Tax System Integrity Working Paper No. 80. The Australian National University, Canberra. Hartner M, Rechberger S, Kirchler E, Schabmann A (2008) Procedural Fairness and Tax Compliance. Economic Analysis and Policy 38, 137–152. Kagan RA, Scholz JT (1984) The Criminology of the Corporation and Regulatory Enforcement Strategies. In: Hawkins K, Thomas JM (eds) Enforcing Regulation, pp. 67–95. Kluwer-Nijhoff Publishing, Boston. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

23

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Kruttschnitt C (1980) Social Status and Sentences of Female Offenders. Law and Society Review 15, 247–266. Lake DA (2006) Relational Authority in the Modern World: Towards a Positive Theory of Legitimacy. Paper presented for the Workshop on Legitimacy in the Modern World, University of California, San Diego, 8–9 December 2006. Leventhal GS (1980) What Should Be Done with Equity Theory? New Approaches to the Study of Fairness in Social Relationships. In: Gergen K, Greenberg M, Willis R (eds) Social Exchange, pp. 27–55. Plenum, New York. Levi M (1997) Consent, Dissent, and Patriotism. Cambridge University Press, Cambridge. Maxfield MG, Babbie E (2008) Research Methods for Criminal Justice and Criminology, 5th edn. Thomson Wadsworth, Belmont, CA. McBarnet D (2003) When Compliance Is Not the Solution but the Problem: From Changes in Law to Changes in Attitude. In: Braithwaite V (ed) Taxing Democracy: Understanding Tax Avoidance and Evasion, pp. 229–244. Ashgate, Aldershot. McGraw K, Scholz J (1991) Appeals to Civic Virtue Versus Attention to Self-interest: Effects on Tax Compliance. Law and Society Review 25, 471–493. Murphy K (2004) The Role of Trust in Nurturing Compliance: A Study of Accused Tax Avoiders. Law and Human Behavior 28, 187–210. Murphy K (2005a) Regulating More Effectively: The Relationship between Procedural Justice, Legitimacy, and Tax Non-compliance. Journal of Law and Society 32, 562–589. Murphy K (2005b) Turning Resistance into Compliance: Evidence from a Longitudinal Study of Tax Scheme Investors. Centre for Tax System Integrity Working Paper No. 77. The Australian National University, Canberra. Murphy K (2005c) To Persuade or to Punish? Developing a More Effective Enforcement Strategy for Social Security Compliance. Report prepared for the Commonwealth Department of Family and Community Affairs. Regulatory Institutions Network, Research School of Social Sciences. The Australian National University, Canberra. Murphy K, Hinds L, Fleming J (2008) Encouraging Public Cooperation and Support for Police. Policing and Society 18, 138–157. New Zealand Inland Revenue (2001) Inland Revenue Business Plan: The Way Forward 2001 Onwards. New Zealand Inland Revenue, Wellington. Reisig MD, Bratton J, Gertz M (2007) The Construct Validity and Refinement of Process-based Policing Measures. Criminal Justice and Behavior 34, 1005–1028. Scholz JT (1991) Cooperative Regulatory Enforcement and the Politics of Administrative Effectiveness. American Political Science Review 85, 115–136. Scholz JT, Lubell M (1998) Trust and Taxpaying: Testing the Heuristic Approach to Collective Action. American Journal of Political Science 42, 398–417. Skitka L (2002) Do the Means Always Justify the Ends, or Do the Ends Sometimes Justify the Means? A Value Model of Justice Reasoning. Personality & Social Psychology Bulletin 28, 588–597. Skogan WG, Frydl K (2004) Fairness and Effectiveness in Policing: The Evidence. Committee to Review Research on Police Policy and Practices. Committee on Law and Justice, Division of Behavioral and Social Sciences and Education, National Research Council. The National Academies Press, Washington, DC. Sykes G, Matza D (1957) Techniques of Neutralization: A Theory of Delinquency. American Sociological Review 22, 488–498. Thornberry TP, Krohn MD (2000) The Self-report Method for Measuring Delinquency and Crime. In: Duffee D (ed) Measurement and Analysis of Crime and Justice: Criminal Justice 2000, Vol. 4, US Department of Justice, Washington, DC. Thurman QC, St John C, Riggs L (1984) Neutralization and Tax Evasion: How Effective Would a Moral Appeal be in Improving Compliance to Tax Laws? Law and Policy 6, 309–327.

24

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

Procedural justice, legitimacy, and compliance

K. Murphy et al.

Tyler TR (1997) The Psychology of Legitimacy: A Relational Perspective on Voluntary Deference to Authorities. Personality and Social Psychology Review 1, 323–345. Tyler TR (2006) Why People Obey the Law. Princeton University Press, Princeton. Tyler TR, Darley J (2000) Building a Law-abiding Society: Taking Public Views about Morality and the Legitimacy of Legal Authorities into Account When Formulating Substantive Law. Hofstra Law Review 28, 707–739. UK Inland Revenue (2001) Managing Customer Relationships: What Does Compliance Mean in The Future? Inland Revenue Workshop, June 2001. UK Inland Revenue (2002) The Government’s Expenditure Plans 2002–2004. Inland Revenue, London. Unnever JD, Colvin M, Cullen FT (2004) Crime and Coercion: A Test of Core Theoretical Propositions. Journal of Research in Crime and Delinquency 41, 244–268. Wenzel M (2002) The Impact of Outcome Orientation and Justice Concerns on Tax Compliance: The Role of Taxpayers’ Identity. Journal of Applied Psychology 87, 629–645. Wenzel M (2006) A Letter from the Tax Office: Compliance Effects of Informational and Interpersonal Justice. Social Justice Research 19, 345–364. Winter SC, May PJ (2001) Motivation for Compliance with Environmental Regulations. Journal of Policy Analysis and Management 20, 675–698.

Appendix The Appendix presents a factor analysis, one for each study, which tests for the assumed conceptual differentiation between the procedural justice, legitimacy of laws, and compliance/cooperation measures used in Study 1 (Table A1), Study 2 (Table A2) and Study 3 (Table A3), respectively.

Table A1 Factor analysis differentiating categories of variables in Study 1: Taxation context Item

Factor 1

1. Compliance Now use tax system in negative way Now look for ways to purposefully cheat Now more defiant toward ATO Now look for ways to recoup losses Now try to avoid paying tax Now no longer declare all income

2

0.81 0.74 0.71 0.70 0.70 0.61

2. Procedural justice How fair was treatment from ATO? How fair were opportunities to present opinion? Were procedures ATO used fair?

0.85 0.83 0.83

3. Legitimacy of laws Not declaring cash is a trivial offence Acceptable to overstate deductions Should honestly declare cash earnings Eigenvalues Explained variance (%)

3

0.80 0.78 0.77 3.72 31

2.16 18

1.41 13

Principal components analysis, oblique rotation. Only factor loadings >0.30 are displayed. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd

25

K. Murphy et al.

Procedural justice, legitimacy, and compliance

Table A2 Factor analysis differentiating categories of variables in Study 2: Social security context Item

Factor 1

1. Procedural justice Centrelink staff always polite Centrelink staff treat people with respect Centrelink respects people’s rights

2

3

0.89 0.78 0.69

2. Legitimacy of laws Welfare system may not be perfect, but works well I question legitimacy of Centrelink’s laws I question fairness of Centrelink’s laws Centrelink’s policies make it hard for students Centrelink’s laws consistent with views of Australians

0.70 0.69 0.66 0.60 0.58

3. Compliance I don’t care if I’m not doing right by Centrelink Need more people to take a stand against Centrelink If Centrelink gets tough with me, I’ll be uncooperative Important not to let Centrelink push you around I tend to be defiant towards Centrelink Eigenvalues Explained variance (%)

0.78 0.75 0.69 0.54 0.53 4.53 35

1.43 11

1.28 10

Principal components analysis, oblique rotation. Only factor loadings >0.30 are displayed. Table A3 Factor analysis differentiating categories of variables in Study 3: Law enforcement context Item

Factor 1

1. Cooperation Will help provide police information Will call police to report crimes Will report dangerous/suspicious activity Will assist police if asked

2

0.90 0.86 0.85 0.83

2. Procedural justice Police are always polite Police treat people with dignity and respect Police try to be fair

0.86 0.86 0.65

3. Legitimacy of laws My feelings about right/wrong consistent with laws Laws police enforce consistent with Australians views Eigenvalues Explained variance (%)

3

0.91 0.88 3.67 41

1.78 20

1.15 13

Principal components analysis, oblique rotation. Only factor loadings >0.30 are displayed.

26

© 2009 The Authors Journal compilation © 2009 Blackwell Publishing Asia Pty Ltd