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Tax Evasion and Social Interactions

Author

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  • Bernard Fortin
  • Guy Lacroix
  • Marie-Claire Villeval

Abstract

The paper extends the standard tax evasion model by allowing for social interactions. In Manski's (1993) nomenclature, our model takes into account social conformity effects (i.e., endogenous interactions), fairness effects (i.e., exogenous interactions) and sorting effects (i.e., correlated effects). Our model is tested using experimental data. Participants must decide how much income to report given their tax rate and audit probability, and given those faced by the other members of their group as well as their mean reported income. The estimation is based on a two-limit simultaneous tobit with fixed group effects. A unique social equilibrium exists when the model satisfies coherency conditions. In line with Brock and Durlauf (2001b), the intrinsic nonlinearity between individual and group responses is sufficient to identify the model without imposing any exclusion restrictions. Our results are consistent with fairness effects but reject social conformity and correlated effects. Cet article généralise le modèle standard de fraude fiscale en permettant la présence d'interactions sociales. Suivant la nomenclature de Manski (1993), notre modèle tient compte des effets de conformité sociale (i.e. interactions endogènes), des effets d'équité (i.e. interactions exogènes) et des effets de sélection (i.e. effets corrélés). Le modèle est testé à l'aide de données expérimentales. Les participants doivent choisir le montant déclaré de leur revenu, étant donné leur taux d'impôt, leur probabilité d'être contrôlé par le fisc et étant donné ceux de leur groupe de référence ainsi que le revenu moyen déclaré par ce dernier. L'estimation se fonde sur un modèle tobit simultané à deux bornes avec des effets fixes de groupe. Un équilibre social unique existe lorsque le modèle satisfait des conditions de cohérence. Suivant en cela Brock et Durlauf (2001b), la non-linéarité intrinsèque entre les réponses individuelles et celles du groupe est suffisante pour identifier le modèle sans avoir à imposer des restrictions d'exclusion. Nos résultats sont cohérents avec la présence d'effets d'équité mais rejettent la conformité sociale ainsi que les effets corrélés.

Suggested Citation

  • Bernard Fortin & Guy Lacroix & Marie-Claire Villeval, 2004. "Tax Evasion and Social Interactions," CIRANO Working Papers 2004s-61, CIRANO.
    • Handle: RePEc:cir:cirwor:2004s-61
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    References listed on IDEAS

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    Keywords

    social; interactions; tax evasion; simultaneous tobit; laboratory experiments.; interactions sociales; fraude fiscale; tobit simultané; économie expérimentale;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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