Does the Level of Work Effort Influence Tax Evasion? Experimental Evidence

Bühren Christoph () and Thorben Kundt
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Bühren Christoph: University of Kassel, Institute of Economics, Nora-Platiel-Straße 4, 34127 Kassel, Germany

Review of Economics, 2014, vol. 65, issue 2, 137-158

Abstract: Using a real effort experiment, we analyze the dependence of tax evasion on the amount of effort invested to generate income. In three treatments, subjects were either endowed with income or had to work moderately or arduously to earn it. In line with prospect theory, subjects evaded more taxes when they worked hard for their income. We find little evidence for the prediction that tax evasion in the endowed treatment is higher than that in the moderate-effort treatment.

Keywords: tax evasion; prospect theory; house money effect; sunk cost effect; real effort experiment (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1515/roe-2014-0203

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