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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/25803
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| Title: | | Tax avoidance, endogenous social norms, and the comparison income effect  |
| Authors: | | Balestrino, Alessandro |
| Issue Date: | | 2006 |
| Series/Report no.: | | CESifo working paper 1758 |
| Abstract: | | We present a model of income tax avoidance with heterogeneous agents, assuming the presence of a comparison income effect and of a psychic cost (disutility) of tax dodging. We analyse the policy preferences of the agents, and identify a median-voter political equilibrium. Paralleling previous results in the optimal taxation literature, we show that the comparison income effect calls for a high degree of progressivity of the income tax; additionally, we find that this tendence is strengthened by the psychic cost of avoidance. We then model the endogenous formation of the stigma attached to the act of avoidance as a conformism game. We argue that such stigma is motivated by the desire to make redistribution more effective, and that it is enhanced by the income comparison effect. |
| JEL: | | D72 H26 H31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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