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

Philipp Doerrenberg, Denvil Duncan and Christopher Zeppenfeld

Journal of Economic Behavior & Organization, 2015, vol. 109, issue C, 85-100

Abstract: This paper examines whether investment in a risky asset depends on future circumstances. We conduct a laboratory experiment where subjects have the opportunity to invest earned income in a risky asset and, depending on randomly assigned treatment states, have the opportunity to respond to the outcome of the investment through extra labor effort and/or tax evasion. We find evidence that ex-post access to labor opportunities decreases ex-ante risk-taking, while access to tax evasion has no effect. Having both opportunities leads to lower risk-taking, but this effect is not statistically significant. We explore the channels behind these results with two additional treatments and find that our results are driven by background risk rather than flexibility.

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: 2015
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Citations: View citations in EconPapers (4)

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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:eee:jeborg:v:109:y:2015:i:c:p:85-100

DOI: 10.1016/j.jebo.2014.11.005

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