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Why Pay Taxes When No One Else Does?

Gil Epstein and Ira Gang

No 4153, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we try to understand the phenomena whereby a large proportion of the population evades tax payments. We present a model which incorporates elements from the theory of information cascades with the standard model of tax evasion and analyze the connection between the decision of a potential tax evader, the number of tax evaders and the number caught in previous periods. General conditions exist under which any expected utility maximizing tax evaders will decide to emulate other tax evaders.

Keywords: information cascades; tax evasion; uncertainty (search for similar items in EconPapers)
JEL-codes: D82 H26 H31 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009-04
New Economics Papers: this item is included in nep-acc, nep-hpe, nep-pbe, nep-pub and nep-upt
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Published - published in: Review of Development Economics, 2010, 14 (2), 374-385

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Journal Article: Why Pay Taxes When No One Else Does? (2010) Downloads
Working Paper: Why Pay Taxes When No One Else Does? (2009) Downloads
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