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The rule of law and sustainability of the constitution: The case of tax evasion


  • Naqvi, Nadeem
  • Neumärker, Bernhard
  • Pech, Gerald


Why do rulers play by the rules? We show that the legality requirement under the rule of law implements an endogenous enforcement mechanism supporting constitutionality. Agents which do not obey unconstitutional legal norms are not sanctioned under constitutional rule. A principal who defects from the constitution but cannot commit himself to never reinstall the constitution finds law enforcement more difficult. As more agents disobey, enforcement becomes less effective. The expectation of an eventual return to constitutionality becomes self-fulfilling. We show this mechanism to be effective in deterring a government from violating constitutional norms.

Suggested Citation

  • Naqvi, Nadeem & Neumärker, Bernhard & Pech, Gerald, 2012. "The rule of law and sustainability of the constitution: The case of tax evasion," The Constitutional Economics Network Working Papers 01-2012, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
  • Handle: RePEc:zbw:cenwps:012012

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    References listed on IDEAS

    1. Roland, Gerard & Verdier, Thierry, 2003. "Law enforcement and transition," European Economic Review, Elsevier, vol. 47(4), pages 669-685, August.
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    5. Kolm, Serge-Christophe, 1973. "A note on optimum tax evasion," Journal of Public Economics, Elsevier, vol. 2(3), pages 265-270, July.
    6. Frank Heinemann, 2000. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 316-318, March.
    7. Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-677, September.
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    15. 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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    More about this item


    constitution; dynamic policy constraints; tax evasion; global games;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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