Circumstantial risk: Impact of future tax evasion and labor supply opportunities on risk exposure

Philipp Doerrenberg, Denvil Duncan and Christopher Zeppenfeld

No 14-014, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper examines whether risk-taking in a lottery depends on the opportunity to respond to the lottery outcome through additional labor effort and/or tax evasion. Previous empirical attempts to answer this question face identification issues due to self selection into jobs that facilitate tax evasion and labor effort exibility. We address these identification issues using a laboratory experiment (N = 180). Subjects have the opportunity to invest earned income in a lottery and, depending on randomly assigned treatment states, have the opportunity to respond to the lottery outcome through evasion and/or extra labor effort. We find strong evidence that ex-post access to labor opportunities reduces ex-ante risk willingness while access to tax evasion has no effect on risk behavior. We discuss possible explanations for this result based on the existing literature.

Keywords: Tax Evasion; Labor Supply; Risk Behavior; Lab Experiment (search for similar items in EconPapers)
JEL-codes: G11 H21 H24 H26 J22 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-iue, nep-lab, nep-lma and nep-pbe
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https://www.econstor.eu/bitstream/10419/93082/1/779717554.pdf (application/pdf)

Related works:
Journal Article: Circumstantial risk: Impact of future tax evasion and labor supply opportunities on risk exposure (2015)
Working Paper: Circumstantial Risk: Impact of Future Tax Evasion and Labor Supply Opportunities on Risk Exposure (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:14014

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