Rank-Dependent Utility, Tax Evasion, and Labor Supply
Link to article:
Authors:
Eide, Erling, Kristine von Simson og Steinar Strøm
Year:
2011
Reference:
vol 67(3), 261-281Summary
In a portfolio model of tax evasion an expected utility maximizer will cheat more than what is estimated in empirical studies. At least two types of explanation have been suggested as solutions to this puzzle: (1) taxpayers act according to some unexpected utility theory, and (2) individual ethical norms and social stigma induce people not to cheat. Based on Norwegian survey data, we find that a rank-dependent expected-utility model performs better than an expected-utility model and that social norms matter in explaining behavior.
JEL:
C 25, D 12, D 81, H 26, J 22
Keywords:
LABOR SUPPLY; TAX EVASION; RANK-DEPENDENT UTILITY
Project:
Oppdragsgiver: Norges forskningsrådOppdragsgivers prosjektnr.:
Frisch prosjekt: 1148 - Taxation and Labor Supply