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Tax Evasion and Social Interactions

Author

Listed:
  • Bernard Fortin

    (Département d'Economique, Université Laval - ULaval - Université Laval [Québec])

  • Guy Lacroix

    (Département d'Economique, Université Laval - ULaval - Université Laval [Québec])

  • Marie Claire Villeval

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the study of labor - Institute for the Study of Labor - IZA)

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.

Suggested Citation

  • Bernard Fortin & Guy Lacroix & Marie Claire Villeval, 2004. "Tax Evasion and Social Interactions," Post-Print halshs-00175016, HAL.
  • Handle: RePEc:hal:journl:halshs-00175016
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00175016
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    More about this item

    Keywords

    social interactions; tax evasion; simultaneous tobit; laboratory experiments;
    All these keywords.

    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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