Tipping and the nation's tax burden: A cross-country study

This article revisits the topic of cross-country differences in the number of tipped service-occupations. Taking a different approach, the study explores the relevance of three tax related economic processes: tax evasion, the crowding-out mechanism and the disposable income effect. The empirical test shows that the higher the tax burden, the lower the number of tipped occupations; a finding which supports the disposable income hypothesis and rejects the tax evasion one. The crowding out hypothesis is also rejected indicating that generosity might not be a valid explanation for tipping as previously suggested by some scholars.