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

  • Michael Pickhardt
  • Goetz Seibold

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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