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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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  18. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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  23. Lima, F.W.S., 2012. "Three-state majority-vote model on square lattice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1753-1758.
  24. Seibold, Götz & Pickhardt, Michael, 2013. "Lapse of time effects on tax evasion in an agent-based econophysics model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(9), pages 2079-2087.
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  28. Zaklan, Georg & Lima, F.W.S. & Westerhoff, Frank, 2008. "Controlling tax evasion fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(23), pages 5857-5861.
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