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Income tax evasion in a society of heterogeneous agents: Evidence from an agent-based model

Author

Listed:
  • Hokamp, Sascha
  • Pickhardt, Michael

Abstract

We analyze the evolution and extent of income tax evasion under alternative governmental policies in an agent-based model with heterogeneous agents. A novel aspect of our modeling is the use of an exponential utility function, which allows us to assume rather realistic audit probabilities and to yield more realistic results with respect to the extent of tax evasion. Further, the introduction of lapse of time effects constitutes another novel aspect of our model. Among other things, the model allows for assessing the impact of alternative policies on tax evasion. Subject to the model features, we find that ethical norms and lapse of time effects reduce the extent of tax evasion particularly strong.

Suggested Citation

  • Hokamp, Sascha & Pickhardt, Michael, 2010. "Income tax evasion in a society of heterogeneous agents: Evidence from an agent-based model," CAWM Discussion Papers 35, University of Münster, Center of Applied Economic Research Münster (CAWM).
  • Handle: RePEc:zbw:cawmdp:35
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    References listed on IDEAS

    as
    1. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
    2. Craig W. Kirkwood, 2004. "Approximating Risk Aversion in Decision Analysis Applications," Decision Analysis, INFORMS, vol. 1(1), pages 51-67, March.
    3. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    4. Georg Zaklan & Frank Westerhoff & Dietrich Stauffer, 2009. "Analysing tax evasion dynamics via the Ising model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 4(1), pages 1-14, June.
    5. repec:wsi:ijmpcx:v:19:y:2008:i:12:n:s0129183108013357 is not listed on IDEAS
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    More about this item

    Keywords

    income tax evasion; heterogeneous population; lapse of time; ethical behavior; agent-based models;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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