Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality

Zsombor Z. Méder (), Andras Simonovits () and János Vincze
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Zsombor Z. Méder: Maastricht University, Department of Economics, The Netherlands

No 1202, Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest

Abstract: We study a family of models of tax evasion, where a flat-rate tax finances only the provision of public goods, neglecting audits and wage differences. We focus on the comparison of two modeling approaches. The first is based on optimizing agents, who are endowed with social preferences, their utility being the sum of private consumption and moral utility. The second approach involves agents acting according to simple heuristics. We find that while we encounter the traditionally shaped Laffer-curve in the optimizing model, the heuristics models exhibit (linearly) increasing Laffer-curves. This difference is related to a peculiar type of behavior emerging within the heuristics based approach: a number of agents lurk in a moral state of limbo, alternating between altruism and selfishness.

Keywords: tax evasion; tax morale; agent-based simulation (search for similar items in EconPapers)
JEL-codes: H26 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-06-08
New Economics Papers: this item is included in nep-cmp, nep-iue, nep-pbe and nep-pub
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Citations: View citations in EconPapers (25)

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Journal Article: Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality (2012)
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