Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect

This file is part of IDEAS, which uses RePEc data

Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect

Author Info

Alessandro Balestrino ()

Additional information is available for the following registered author(s):

Alessandro Balestrino

Abstract

We present a model of income tax avoidance with heterogeneous agents, assuming the presence of a comparison income effect and of a psychic cost (disutility) of tax dodging. We analyse the policy preferences of the agents, and identify a median-voter political equilibrium. Paralleling previous results in the optimal taxation literature, we show that the comparison income effect calls for a high degree of progressivity of the income tax; additionally, we find that this tendence is strengthened by the psychic cost of avoidance. We then model the endogenous formation of the stigma attached to the act of avoidance as a "conformism game". We argue that such stigma is motivated by the desire to make redistribution more effective, and that it is enhanced by the income comparison effect.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1758.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1758

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de

For technical questions regarding this item, or to correct its listing, contact: (Julio Saavedra).

Other versions of this item:

Paper
- Alessandro Balestrino, . "Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect," EPRU Working Paper Series 05-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Dec 2005. [Downloadable!]

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-08-05 (All new papers)
NEP-PBE-2006-08-05 (Public Economics)
NEP-POL-2006-08-05 (Positive Political Economics)
NEP-PUB-2006-08-05 (Public Finance)
NEP-SOC-2006-08-05 (Social Norms & Social Capital)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Alessandro Balestrino & Umberto Galmarini, 2003. "Imperfect Tax Compliance and the Optimal Provision of Public Goods," Bulletin of Economic Research, Blackwell Publishing, vol. 55(1), pages 37-52, January. [Downloadable!] (restricted)
Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March. [Downloadable!] (restricted)
Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May. [Downloadable!] (restricted)
Lindbeck, A & Nyberg, S & Weibull, J-W, 1997. "Social Norms and Economic Incentives in the Welfare State," Research Institute of Industrial Economics Working Papers 476, Research Institute of Industrial Economics (IFN).
Other versions:
- Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February. [Downloadable!] (restricted)
Orviska, Marta & Hudson, John, 2003. "Tax evasion, civic duty and the law abiding citizen," European Journal of Political Economy, Elsevier, vol. 19(1), pages 83-102, March. [Downloadable!] (restricted)
Boskin, Michael J & Sheshinski, Eytan, 1978. "Optimal Redistributive Taxation when Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, MIT Press, vol. 92(4), pages 589-601, November. [Downloadable!] (restricted)
Dan Anderberg & Alessandro Balestrino & Umberto Galmarini, 2003. "Search and Taxation in a Model of Underground Economic Activities," Economic Inquiry, Oxford University Press, vol. 41(4), pages 647-659, October. [Downloadable!] (restricted)
Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March. [Downloadable!] (restricted)
Cowell, F A, 1990. "Tax Sheltering and the Cost of Evasion," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 231-43, January. [Downloadable!] (restricted)
Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July. [Downloadable!] (restricted)
Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February. [Downloadable!] (restricted)
Armin Falk & Markus Knell, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," Scandinavian Journal of Economics, Blackwell Publishing, vol. 106(3), pages 417-435, October. [Downloadable!] (restricted)
Other versions:
- Falk, Armin & Knell, Markus, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," IZA Discussion Papers 1152, Institute for the Study of Labor (IZA). [Downloadable!]
- Falk, Armin & Knell, Markus, 2004. "Choosing the Joneses: Endogenous Goals and Reference Standards," CEPR Discussion Papers 4459, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Lindbeck, Assar & Persson, Mats, 2006. "A Model of Income Insurance and Social Norms," Seminar Papers 742, Stockholm University, Institute for International Economic Studies. [Downloadable!]
Other versions:
- Lindbeck, Assar & Persson, Mats, 2006. "A Model of Income Insurance and Social Norms," Working Paper Series 659, Research Institute of Industrial Economics. [Downloadable!]
- Assar Lindbeck & Mats Persson, 2006. "A Model of Income Insurance and Social Norms," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Joel Slemrod, 1998. "A General Model of the Behavioral Response to Taxation," NBER Working Papers 6582, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer, vol. 8(2), pages 119-128, March. [Downloadable!] (restricted)
Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June. [Downloadable!] (restricted)
Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 749-75, June. [Downloadable!] (restricted)
Other versions:
- George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," CREMA Working Paper Series 2006-10, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
Other versions:
- Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," IEW - Working Papers iewwp287, Institute for Empirical Research in Economics - IEW. [Downloadable!]
Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Alessandro Balestrino, 2007. "It is a Theft but not a Crime," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Other versions:
- Balestrino, Alessandro, 2008. "It is a theft but not a crime," European Journal of Political Economy, Elsevier, vol. 24(2), pages 455-469, June. [Downloadable!] (restricted)

Statistics

Access and download statistics

Did you know? Over 1000 institutions contribute their bibliographic data directly to this service.

This page was last updated on 2009-11-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.