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Citizenship and Power in an Agent-based Model of Tax Compliance with Public Expenditure

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  • Paolo Pellizzari

    () (Department of Economics, University Of Venice C� Foscari)

  • Dino Rizzi

    (Department of Economics, University Of Venice C� Foscari)

Abstract

In this paper we present a model of tax compliance with heterogeneous agents who maximize their individual utility based on income and the conjectured level of per capita public expenditure. We formally include psychological drivers in this model. These drivers affect individual behavior, such as risk aversion, together with appreciation of public expenditure, expectations about peers� compliance and a natural inclination to comply, all of which we summarize in a quality termed �citizenship�. The enforcement system, based on random inspections, is standard and only partially known to agents. The agent-based model is simulated under a variety of settings, representing different �societies�. We use the artificial data produced by the model to estimate the effects of taxpayers� traits on personal tax behavior and to build a compliance societal slippery slope. At the individual level, we find a positive dependence of compliance on all variables, with the significant exception of the tax rate, which has a negative impact. As far as societies are concerned, we show how aggregate tax compliance depends on composite indices of citizenship and power, and we find that the former is more important than the latter.

Suggested Citation

  • Paolo Pellizzari & Dino Rizzi, 2012. "Citizenship and Power in an Agent-based Model of Tax Compliance with Public Expenditure," Working Papers 2012_24, Department of Economics, University of Venice "Ca' Foscari", revised 2012.
  • Handle: RePEc:ven:wpaper:2012_24
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Benno Torgler, 2014. "Can Tax Compliance Research Profit from Biology?," CREMA Working Paper Series 2014-08, Center for Research in Economics, Management and the Arts (CREMA).
    2. Benno Torgler, 2014. "Can Tax Compliance Research Profit from Biology?," QuBE Working Papers 025, QUT Business School.
    3. Sascha Hokamp & Götz Seibold, 2014. "Tax Compliance and Public Goods Provision. An Agent-based Econophysics Approach," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 6(4), pages 217-236, December.
    4. Semjén, András, 2017. "Az adózói magatartás különféle magyarázatai
      [Various explanations for tax compliance]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 140-184.
    5. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.
    6. Paolo Pellizzari & Elena Sartori & Marco Tolotti, 2015. "Optimal Policies In Two-Step Binary Games Under Social Pressure And Limited Resources," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 18(05n06), pages 1-16, August.
    7. repec:bla:rdevec:v:21:y:2017:i:3:p:713-730 is not listed on IDEAS

    More about this item

    Keywords

    Tax evasion; public expenditure; agent-based models;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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