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Tax avoidance and the endogenous formation of social norms

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  • Balestrino, Alessandro

Abstract

We analyse a model of income tax avoidance with heterogenous agents who face monetary as well as psychic costs in order to successfully hide their income from the fisc. We argue that, in general, the stigmatisation of tax dodging is motivated by the desire to make redistribution more effective. In this context, we demonstrate two results. First, we study the policy preferences of the agents, identify a median-agent political equilibrium, and show that the psychic cost of tax dodging leads to a highly progressive income tax. Second, we model the endogenous formation of stigma as a "conformism game", and argue that, since high levels of stigma are favoured by the low-income agents, a society-wide condemnation of tax dodging will be established only in robust democracies where these agents possess enough social influence.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 39 (2010)
Issue (Month): 5 (October)
Pages: 601-609

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Handle: RePEc:eee:soceco:v:39:y:2010:i:5:p:601-609

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Web page: http://www.elsevier.com/locate/inca/620175

Related research

Keywords: Tax avoidance Social norms Conformism Median voter;

References

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  23. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
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Citations

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Cited by:
  1. Grajzl, Peter & Baniak, Andrzej, 2012. "Mandating behavioral conformity in social groups with conformist members," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 479-493.
  2. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
  3. Yamamura, Eiji, 2012. "Norm for redistribution, social capital, and perceived tax burden: comparison between high- and low-income households," MPRA Paper 39434, University Library of Munich, Germany.

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