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Unemployment, tax evasion and the slippery slope framework

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  • Gaetano Lisi

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Abstract

The proposed theoretical work introduces the basic insights of the ‘slippery slope’ framework into the benchmark macroeconomic model of the labour market in order to study the relation between tax compliance, tax evasion and unemployment. This paper shows that the firm’s decision to evade taxes also depends on trust in tax authorities and affects one of the most important macroeconomic variables: the unemployment rate. Also, the model is able to mimic the crucial interaction between trust and power and its effects on tax compliance. The main result is that with the ‘right mix’ of policy tools of deterrence, trust in tax authorities is maximised, tax compliance increases and a reduction of tax evasion may decrease unemployment. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s12232-012-0165-x
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Bibliographic Info

Article provided by Springer in its journal International Review of Economics.

Volume (Year): 59 (2012)
Issue (Month): 3 (September)
Pages: 297-302

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Handle: RePEc:spr:inrvec:v:59:y:2012:i:3:p:297-302

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Web page: http://www.springer.com/economics/journal/12232

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Related research

Keywords: Tax evasion; Tax compliance; Trust and power; Unemployment; H26; J64; K42;

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References

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  1. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association, vol. 58(4), pages 643-63, December.
  2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  3. Stephan Muehlbacher & Erich Kirchler, 2010. "Tax Compliance by Trust and Power of Authorities," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 607-610.
  4. Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, number 9780521876742, April.
  5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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Cited by:
  1. Gaetano Lisi, 2013. "Tax Morale, Tax Compliance and the Optimal Tax Policy," Discussion Papers in Economic Behaviour 0313, University of Valencia, ERI-CES.
  2. Gaetano Lisi, 2012. "Macroeconomic implications of the dynamics between power and trust: a theoretical formalisation of the ‘slippery slope’ framework," Discussion Papers in Economic Behaviour 1012, University of Valencia, ERI-CES.

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