Misreporting, retroactive audit and redistribution

Sandrine Spaeter and Marc Willinger

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: In this paper, we investigate an audit policy that allows a regulator to control past declarations of an agent who is caught to fraud in the current period or to adopt an action that is not desirable for Society. Coupled with redistribution effects due to the production of a public good, we show that retroactivity has not always the desired effect on the level of evasion or the level of effort, once the agent has decided to deviate from a given objective. Nevertheless, we derive conditions under which retroactivity lessens fraudulent behaviors, in quantity and in value. As a related result, authorities should communicate about how they use the individual contributions but information should not be completely transparent in order to fight efficiently against deviation. Redistribution and retroactivity may have opposite effects on the behavior of the agent when combined together.

Keywords: moral hazard; retroactive audit; redistribution; public good; fraud. (search for similar items in EconPapers)
JEL-codes: D82 H23 H30 Q25 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-acc and nep-pbe
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Misreporting, Retroactive Audit and Redistribution (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2006-30

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