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Macroeconomic implications of the dynamics between power and trust: a theoretical formalisation of the ‘slippery slope’ framework

  • Gaetano Lisi

    ()

    (University of Cassino)

This paper aims to provide a thorough theoretical formalisation of the ‘slippery slope’ framework in order to highlight the effects and the macroeconomic implications of the dynamics between power and trust. In particular, the proposed model is able to differentiate between coercive and legitimate power, thus elucidating the dynamics between power and trust and its influence on tax climate and tax compliance. Also, by introducing trust in tax authorities as a determinant of tax compliance, the decision to under-report income is no longer based on expected profits maximisation and thus the tax compliance problem can not be explained by a pure economic approach. The main results of the model are the following: (i) trust-building actions are better than deterring measures for overall tax compliance, since they establish a cooperative tax climate and lead to a legitimate power, while too much power corrodes trust; (ii) in a society where trust is maximised and tax auth! ority benefits from a legitimate power, both employment and economic growth are higher since tax evasion and shadow economy are lower and the level of taxation can be reduced.

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File URL: http://www.uv.es/erices/RePEc/WP/2012/1012.pdf
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Paper provided by University of Valencia, ERI-CES in its series Discussion Papers in Economic Behaviour with number 1012.

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Date of creation: 2012
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Handle: RePEc:dbe:wpaper:1012
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  1. Christoph A. Schaltegger & Benno Torgler, 2005. "Trust and Fiscal Performance: A Panel Analysis with Swiss Data," CREMA Working Paper Series 2005-05, Center for Research in Economics, Management and the Arts (CREMA).
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  3. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
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  6. Lisi, Gaetano, 2012. "Unemployment, tax evasion and the "slippery slope" framework," MPRA Paper 37433, University Library of Munich, Germany.
  7. Torgler, Benno & Schneider, Friedrich, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," IZA Discussion Papers 2541, Institute for the Study of Labor (IZA).
  8. Cummings, Ronald G. & Martinez-Vazquez, Jorge & McKee, Michael & Torgler, Benno, 2009. "Tax morale affects tax compliance: Evidence from surveys and an artefactual field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 447-457, June.
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  12. Juan Molero & Francesc Pujol, 2012. "Walking Inside the Potential Tax Evader’s Mind: Tax Morale Does Matter," Journal of Business Ethics, Springer, vol. 105(2), pages 151-162, January.
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  20. repec:cup:cbooks:9780521876742 is not listed on IDEAS
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