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Analysing tax evasion dynamics via the Ising model

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Author Info

  • Georg Zaklan
  • Frank Westerhoff
  • Dietrich Stauffer

Abstract

We develop a model of tax evasion based on the Ising model. We augment the model using an appropriate enforcement mechanism that may allow policy makers to curb tax evasion. With a certain probability tax evaders are subject to an audit. If they get caught they behave honestly for a certain number of periods. Simulating the model for a range of parameter combinations, we show that tax evasion may be controlled effectively by using punishment as an enforcement mechanism.

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File URL: http://arxiv.org/pdf/0801.2980
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Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 0801.2980.

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Date of creation: Jan 2008
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Handle: RePEc:arx:papers:0801.2980

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References

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  1. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(1), pages 25-48, Winter.
  2. Zaklan, Georg & Lima, F.W.S. & Westerhoff, Frank, 2008. "Controlling tax evasion fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 387(23), pages 5857-5861.
  3. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, Elsevier, vol. 1(3-4), pages 323-338, November.
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Cited by:
  1. Andrei, Amanda L. & Comer, Kevin & Koehler, Matthew, 2014. "An agent-based model of network effects on tax compliance and evasion," Journal of Economic Psychology, Elsevier, Elsevier, vol. 40(C), pages 119-133.
  2. Paolo Pellizzari & Dino Rizzi, 2011. "A Multi-Agent Model of Tax Evasion with Public Expenditure," Working Papers 2011_15, Department of Economics, University of Venice "Ca' Foscari".
  3. Pellizzari, Paolo & Rizzi, Dino, 2014. "Citizenship and power in an agent-based model of tax compliance with public expenditure," Journal of Economic Psychology, Elsevier, Elsevier, vol. 40(C), pages 35-48.
  4. Pickhardt, Michael & Seibold, Goetz, 2011. "Income tax evasion dynamics: Evidence from an agent-based econophysics model," CAWM Discussion Papers, Center of Applied Economic Research Münster (CAWM), University of Münster 53, Center of Applied Economic Research Münster (CAWM), University of Münster.
  5. Maria Letizia Bertotti & Giovanni Modanese, 2014. "Micro to macro models for income distribution in the absence and in the presence of tax evasion," Papers 1403.0015, arXiv.org.
  6. Hokamp, Sascha, 2014. "Dynamics of tax evasion with back auditing, social norm updating, and public goods provision – An agent-based simulation," Journal of Economic Psychology, Elsevier, Elsevier, vol. 40(C), pages 187-199.
  7. Chen, Shu-Heng & Chang, Chia-Ling & Wen, Ming-Chang, 2014. "Social networks and macroeconomic stability," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 8(16), pages 1-40.
  8. Sascha Hokamp & Michael Pickhardt, . "Income Tax Evasion in a Society of Heterogeneous Agents – Evidence from an Agent-based Model," Working Papers, Institute of Spatial and Housing Economics, Munster Universitary 201035, Institute of Spatial and Housing Economics, Munster Universitary.
  9. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, Elsevier, vol. 40(C), pages 1-19.
  10. Shu-Heng Chen & Sai-Ping Li, 2011. "Econophysics: Bridges over a Turbulent Current," Papers 1107.5373, arXiv.org.
  11. Chen, Shu-Heng & Chang, Chia-Ling & Tseng, Yi-Heng, 2014. "Social networks, social interaction and macroeconomic dynamics: How much could Ernst Ising help DSGE?," Research in International Business and Finance, Elsevier, Elsevier, vol. 30(C), pages 312-335.
  12. Levaggi, Rosella & Menoncin, Francesco, 2012. "Tax audits, fines and optimal tax evasion in a dynamic context," Economics Letters, Elsevier, Elsevier, vol. 117(1), pages 318-321.

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