Tax avoidance, endogenous social norms, and the comparison income effect

Alessandro Balestrino

CHILD Working Papers from CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY

Abstract: We analyse a model of income tax avoidance with heterogenous agents; we assume the presence of a comparison income e¤ect and of a psychic cost (disutility) of tax dodging. In this context, we show two sets of results. First, we study the policy preferences of the agents, and identify a median-agent political equilibrium. Paralleling previous ?ndings in the optimal taxation literature, we show that the comparison income e¤ect calls for a high degree of progressivity of the income tax; additionally, we ?nd that this tendence is strenghtened by the psychic cost of avoidance. Second, we model the endogenous formation of the stigma attached to the act of avoidance as a "conformism game", and propose a "modal-agent social equilibrium". We also argue that, in general, the stigma is motivated by the desire to make redistribution more e¤ective, as well as by the need to facilitate social competition.

Keywords: tax avoidance; social norms; conformism; comparison income; median voter (search for similar items in EconPapers)
JEL-codes: D72 H26 H31 Z13 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-06
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect (2006)
Working Paper: Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect (2005)
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