The tax evasion social multiplier: Evidence from Italy
AbstractWe estimate social externalities of tax evasion in a model where congestion of the auditing resources of local tax authorities generates a social multiplier. Identification is based on a contrast of the variance of tax evasion at different levels of aggregation. We use a unique data set that contains audits of about 80,000 small businesses and professionals in Italy and also provides an exact measure of reference groups in our model. We find a social multiplier of about 3, which means that the equilibrium response to a shock that induces an exogenous variation in mean concealed income is about 3 times the initial average response. This is a short-run effect that persists to the extent that auditing resources are not adjusted to internalize the congestion externality.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 96 (2012)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/505578
Social interactions; Neighborhood effects; Social multiplier; Tax evasion; Tax compliance; Excess variance;
Find related papers by JEL classification:
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- Z19 - Other Special Topics - - Cultural Economics - - - Other
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