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Social networks and occupational choice: The endogenous formation of attitudes and beliefs about tax compliance

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  • Hashimzade, Nigar
  • Myles, Gareth D.
  • Page, Frank
  • Rablen, Matthew D.

Abstract

The paper analyses the emergence of group-specific attitudes and beliefs about tax compliance when individuals interact in a social network. It develops a model in which taxpayers possess a range of individual characteristics – including attitude to risk, potential for success in self-employment, and the weight attached to the social custom for honesty – and make an occupational choice based on these characteristics. Occupations differ in the possibility for evading tax. The social network determines which taxpayers are linked, and information about auditing and compliance is transmitted at meetings between linked taxpayers. Using agent-based simulations, the analysis demonstrates how attitudes and beliefs endogenously emerge that differ across sub-groups of the population. Compliance behaviour is different across occupational groups, and this is reinforced by the development of group-specific attitudes and beliefs. Taxpayers self-select into occupations according to the degree of risk aversion, the subjective probability of audit is sustained above the objective probability, and the weight attached to the social custom differs across occupations. These factors combine to lead to compliance levels that differ across occupations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 40 (2014)
Issue (Month): C ()
Pages: 134-146

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Handle: RePEc:eee:joepsy:v:40:y:2014:i:c:p:134-146

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Web page: http://www.elsevier.com/locate/joep

Related research

Keywords: 3020; 4270; Tax evasion; Attitudes; Beliefs; Endogeneity; Social network; Agent-based modelling; Bomb-crater effect;

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Cited by:
  1. Benno Torgler, 2014. "Can Tax Compliance Research Profit from Biology?," QuBE Working Papers 025, QUT Business School.

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