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Income Tax Evasion Dynamics: Evidence from an Agent-based Econophysics Model

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  • Michael Pickhardt
  • Goetz Seibold

Abstract

We analyze income tax evasion dynamics in a standard model of statistical me- chanics, the Ising model of ferromagnetism. However, in contrast to previous re- search, we use an inhomogeneous multi-dimensional Ising model where the local degrees of freedom (agents) are subject to a specific social temperature and coupled to external fields which govern their social behavior. This new modeling frame al- lows for analyzing large societies of interacting heterogeneous agents. As a second novelty, our model may reproduce results from agent-based models that incorporate standard Allingham and Sandmo tax evasion features as well as results from exist- ing two-dimensional Ising based tax evasion models. We then use our model for analyzing income tax evasion dynamics under different enforcement scenarios and point to some policy implications.

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Paper provided by Institute of Spatial and Housing Economics, Munster Universitary in its series Working Papers with number 201179.

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Handle: RePEc:muc:wpaper:201179

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Related research

Keywords: Tax Evasion; Tax Compliance; Ising Model; Econophysics; Numerical Simulation;

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References

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Cited by:
  1. Pellizzari, Paolo & Rizzi, Dino, 2014. "Citizenship and power in an agent-based model of tax compliance with public expenditure," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 35-48.
  2. 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, vol. 40(C), pages 187-199.
  3. Dino Rizzi, 2012. "Tax Evasion Indices and Profiles," Working Papers 2012:37, Department of Economics, University of Venice "Ca' Foscari", revised 2012.

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