IDEAS home Printed from https://ideas.repec.org/a/cem/jaecon/v8y2005n2p279-297.html
   My bibliography  Save this article

Community tax evasion models: A stochastic dominance test

Author

Abstract

In a multi community environment local authorities compete for tax base. When monitoring is imperfect, agents may decide not to pay in their community (evasion), and save the tax difference. The agent decision on where to pay taxes is based on the probability of getting caught, the fine he eventually will have to pay and the time cost of paying in a neighbor community. First, we prove that if the focus of the agentsÂ’ decision is the probability of getting caught and the fine, only the richest people evade. If instead, the key ingredient is the time cost of evading, only the poorest cheat. Second, we test the evasion pattern on the Automobile Registration System in Uruguay using two stochastic dominance tests. The evidence favors in this case the hypothesis that richer people are the evaders.

Suggested Citation

  • Néstor Gandelman, 2005. "Community tax evasion models: A stochastic dominance test," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 279-297, November.
    • Handle: RePEc:cem:jaecon:v:8:y:2005:n:2:p:279-297
    as

    Download full text from publisher

    File URL: https://ucema.edu.ar/publicaciones/download/volume8/gandelman.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Saba, Richard P, et al, 1995. "The Demand for Cigarette Smuggling," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 189-202, April.
    2. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
    3. Oliver Linton & Esfandiar Maasoumi & Yoon-Jae Wang, 2002. "Consistent testing for stochastic dominance: a subsampling approach," CeMMAP working papers 03/02, Institute for Fiscal Studies.
    4. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    5. Cohn, Richard A, et al, 1975. "Individual Investor Risk Aversion and Investment Portfolio Composition," Journal of Finance, American Finance Association, vol. 30(2), pages 605-620, May.
    6. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    7. Gandelman Néstor & Hernández-Murillo Rubén, 2004. "Tax Competition and Tax Harmonization With Evasion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-24, May.
    8. Levy, Haim, 1994. "Absolute and Relative Risk Aversion: An Experimental Study," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 289-307, May.
    9. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    10. Anderson, Gordon, 1996. "Nonparametric Tests of Stochastic Dominance in Income Distributions," Econometrica, Econometric Society, vol. 64(5), pages 1183-1193, September.
    11. F. Thomas Juster & Paul Wachtel, 1974. "Anticipatory and Objective Models of Durable Goods Demand," NBER Chapters, in: Explorations in Economic Research, Volume 1, number 2, pages 340-392, National Bureau of Economic Research, Inc.
    12. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
    13. Hess, Alan C, 1977. "A Comparison of Automobile Demand Equations," Econometrica, Econometric Society, vol. 45(3), pages 683-701, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gandelman Néstor & Hernández-Murillo Rubén, 2004. "Tax Competition and Tax Harmonization With Evasion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-24, May.
    2. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 651-671, November.
    3. Apolte, Thomas, 2001. "How Tame Will Leviathan Become in Institutional Competition? Competition among Governments in the Provision of Public Goods," Public Choice, Springer, vol. 107(3-4), pages 359-381, June.
    4. Yutao Han & Patrice Pieretti & Benteng Zou, 2017. "On The Desirability Of Tax Coordination When Countries Compete In Taxes And Infrastructure," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 682-694, April.
    5. Keuschnigg, Christian & Loretz, Simon & Winner, Hannes, 2014. "Tax Competition and Tax Coordination in the European Union: A Survey," Working Papers in Economics 2014-4, University of Salzburg.
    6. Boadway, Robin & Tremblay, Jean-François, 2012. "Reassessment of the Tiebout model," Journal of Public Economics, Elsevier, vol. 96(11), pages 1063-1078.
    7. Leonzio Rizzo, 2006. "Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici," Economia politica, Società editrice il Mulino, issue 1, pages 89-120.
    8. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    9. Han, Yutao & Pieretti, Patrice & Zanaj, Skerdilajda & Zou, Benteng, 2014. "Asymmetric competition among nation states: A differential game approach," Journal of Public Economics, Elsevier, vol. 119(C), pages 71-79.
    10. Krishanu Karmakar & Jorge Martinez-Vazquez, 2014. "Fiscal Competition versus Fiscal Harmonization: A Review of the Arguments," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1431, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    11. Baldwin, Richard E. & Forslid, Rikard, 2002. "Tax Competition and the Nature of Capital," Research Papers in Economics 2002:18, Stockholm University, Department of Economics.
    12. Lamia Bekkour & Thorsten Lehnert & Maria Chiara Amadori, 2011. "The Relative Informational Efficiency of Stocks, Options and Credit Default Swaps," DEM Discussion Paper Series 11-13, Department of Economics at the University of Luxembourg.
    13. Rademacher, Inga, 2013. "Tax competition in the eurozone: Capital mobility, agglomeration, and the small country disadvantage," MPIfG Discussion Paper 13/13, Max Planck Institute for the Study of Societies.
    14. Sandy Fréret & Denis Maguain, 2017. "The effects of agglomeration on tax competition: evidence from a two-regime spatial panel model on French data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1100-1140, December.
    15. Jean Gabszewicz & Ornella Tarola & Skerdilajda Zanaj, 2016. "Migration, wages and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(3), pages 434-453, June.
    16. Franto Ricka, 2012. "The right-wing power of small countries," Working Papers 153, European Bank for Reconstruction and Development, Office of the Chief Economist.
    17. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 768-776, October.
    18. Pierre Favardin, 1996. "La compétition entre collectivités locales," Revue Économique, Programme National Persée, vol. 47(2), pages 365-381.
    19. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    20. Sam Bucovetsky & Michael Smart, 2006. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 119-144, January.

    More about this item

    Keywords

    tax evasion; stochastic dominance;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cem:jaecon:v:8:y:2005:n:2:p:279-297. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Valeria Dowding (email available below). General contact details of provider: https://edirc.repec.org/data/cemaaar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.