Tax Evasion and Social Interactions

Bernard Fortin (), Guy Lacroix and Marie Claire Villeval

No 1359, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The paper extends the standard tax evasion model by allowing for social interactions. In Manski’s (1993) nomenclature, our model takes into account social conformity effects (i.e., endogenous interactions), fairness effects (i.e., exogenous interactions) and sorting effects (i.e., correlated effects). Our model is tested using experimental data. Participants must decide how much income to report given their tax rate and audit probability, and given those faced by the other members of their group as well as their mean reported income. The estimation is based on a two-limit simultaneous tobit with fixed group effects. A unique social equilibrium exists when the model satisfies coherency conditions. In line with Brock and Durlauf (2001b), the intrinsic nonlinearity between individual and group responses is sufficient to identify the model without imposing any exclusion restrictions. Our results are consistent with fairness effects but reject social conformity and correlated effects.

Keywords: simultaneous tobit; tax evasion; social interactions; laboratory experiments (search for similar items in EconPapers)
JEL-codes: C24 C92 D63 H26 Z13 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-10
New Economics Papers: this item is included in nep-exp, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - revised version published in: Journal of Public Economics, 2007, 91 (11-12), 2089-2112.

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Related works:
Journal Article: Tax evasion and social interactions (2007)
Working Paper: Tax Evasion and Social Interactions (2007)
Working Paper: Tax Evasion and Social Interactions (2005)
Working Paper: Tax Evasion and Social Interactions (2004)
Working Paper: Tax Evasion and Social Interactions (2004)
Working Paper: Tax Evasion and Social Interactions (2004)
Working Paper: Tax Evasion and Social Interactions (2004)
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