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Study on labor supply when tax evasion is an option with Box-Cox functional forms and random parameters

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  • Razzolini, Tiziano

    ()
    (Department of Economics)

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    Abstract

    Labour supply when tax evasion is an option is analysed within a discrete choice framework which incorporates random parameters and Box-Cox functional forms, using mixed logit models. Deviates in parameters and, in some cases, correlation between alternatives in the evasion group are found to be significant. The models utilized yield good predictions in terms of labour supply and taxes paid by nonevaders. The goodness of fit and quality of prediction is improved by the introduction of correlation between random coefficients.

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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2006/Memo-25-2006.pdf
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    Bibliographic Info

    Paper provided by Oslo University, Department of Economics in its series Memorandum with number 25/2006.

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    Length: 39 pages
    Date of creation: 01 Dec 2006
    Date of revision:
    Handle: RePEc:hhs:osloec:2006_025

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    Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
    Phone: 22 85 51 27
    Fax: 22 85 50 35
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    Web page: http://www.oekonomi.uio.no/indexe.html
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    Keywords: Labour supply; tax evasion; mixed logit model;

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    1. Lacroix, Guy & Fortin, Bernard, 1992. "Utility-Based Estimation of Labour Supply Functions in the Regular and Irregular Sectors," Economic Journal, Royal Economic Society, vol. 102(415), pages 1407-22, November.
    2. John K. Dagsvik & Steinar Strøm, 2004. "Sectoral Labor Supply, Choice Restrictions and Functional Form," Discussion Papers 388, Research Department of Statistics Norway.
    3. Myles, Gareth D. & Naylor, Robin A., 1996. "A model of tax evasion with group conformity and social customs," European Journal of Political Economy, Elsevier, vol. 12(1), pages 49-66, April.
    4. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
    5. Erard, Brian & Feinstein, Jonathan S, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 70-89.
    6. Jørgensen, Øystein & Ognedal, Tone & Strøm, Steinar, 2005. "Labor supply when tax evasion is an option," Memorandum 06/2005, Oslo University, Department of Economics.
    7. Train, Kenneth, 2000. "Halton Sequences for Mixed Logit," Department of Economics, Working Paper Series qt6zs694tp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    8. Pestieau, P. & Possen, U.M., 1988. "Tax Evasion And Occupational Choice," Papers 404, Cornell - Department of Economics.
    9. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610r, Wisconsin Madison - Social Systems.
    10. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    11. Gordon, James P. P., 1989. "Individual morality and reputation costs as deterrents to tax evasion," European Economic Review, Elsevier, vol. 33(4), pages 797-805, April.
    12. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
    13. 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.
    14. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    15. Cowell, Frank A., 1985. "Tax evasion with labour income," Journal of Public Economics, Elsevier, vol. 26(1), pages 19-34, February.
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