nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2019‒03‒04
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Norms, Enforcement, and Tax Evasion By Timothy Besley; Anders Jensen; Torsten Persson
  2. Tax Evasion on a Social Network By Duccio Gamannossi degl’Innocenti; Matthew D. Rablen
  3. Voluntary Disclosure Schemes for Offshore Tax Evasion By Matthew Gould; Matthew D. Rablen
  4. Teach to Comply? Evidence from a Taxpayer Education Programme in Rwanda By Mascagni, Giulia; Santoro, Fabrizio; Mukama, Denis
  5. A psychometric investigation of the personality traits underlying individual tax morale By Nicolas Jacquemet; Stephane Luchini; Antoine Malézieux; Jason Shogren
  6. Labor Market Regulations in the Context of Structural Transformation By Ranjan, Priya; Hasan, Rana; Eleazar, Erik Jan

  1. By: Timothy Besley; Anders Jensen; Torsten Persson
    Abstract: This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK, which led to widespread evasion. The evidence is consistent with the model's main predictions on the dynamics of evasion.
    JEL: H26 H3
    Date: 2019–02
  2. By: Duccio Gamannossi degl’Innocenti (University of Exeter, UK); Matthew D. Rablen (University of Sheffield, UK)
    Abstract: We relate tax evasion behavior to a substantial literature on social comparison in judgements. Taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network. The unique Nash equilibrium of the model relates optimal evasion to a (Bonacich) measure of network centrality: more central taxpayers evade more. Given that tax authorities are now investing heavily in big-data tools that aim to construct social networks, we investigate the value of acquiring network information. We do this using networks that allow for celebrity taxpayers, whose consumption is widely seen, and who are systematically of higher wealth. We show that there are pronounced returns to the initial acquisition of network information, albeit targeting audits with highly incomplete knowledge of social networks may be counterproductive.
    Keywords: Tax Evasion; Social Networks; Network centrality; Optimal Auditing; Social Comparison; Relative Consumption
    JEL: H26 D85 K42
    Date: 2019–02
  3. By: Matthew Gould (Brunel University, UK); Matthew D. Rablen (University of Sheffield, UK)
    Abstract: Tax authorities worldwide are implementing voluntary disclosure schemes to recover tax on offshore investments. The US and UK, in particular, have implemented such schemes in response to bulk acquisitions of information on o¤shore holdings, recent examples of which are the Paradise and Panama papers. Schemes oter affected investors the opportunity to make a voluntary disclosure, with reduced ne rates for truthful disclosure. Might such incentives, once anticipated by investors, simply encourage evasion in the rst place? We characterize the investor/tax authority game with and without a scheme, allowing for the possibility that some o¤shore investment has legitimate economic motives. We show that a scheme increases net expected tax revenue, decreases illegal o¤shore investment, increases onshore investment, but could either increase or decrease legal o¤shore investment. The optimal disclosure scheme o¤ers maximal incentives for truthful disclosure by imposing the minimum allowable rate of ne.
    Keywords: voluntary disclosure; offshore tax evasion; tax amnesty; third party information
    JEL: H26 D85
    Date: 2019–02
  4. By: Mascagni, Giulia; Santoro, Fabrizio; Mukama, Denis
    Abstract: The role of taxpayer education in improving tax compliance has been largely unexplored in the literature. This paper starts to fill this gap by providing the first rigorous evaluation of the effectiveness of taxpayer education on knowledge, perceptions, and compliance, which took place in Rwanda. Our analysis is based on a unique dataset that combines administrative and survey data. We show that taxpayer education results in significant and large increases in knowledge, which starts from a very low level at baseline, and that it contributes to improving compliance behaviour. Our strongest result is that training new taxpayers helps bring them into the habit of filing tax declarations – an obligation many fail to comply with. In terms of policy, our results show that the benefits of taxpayer education go beyond increased revenue in the short term, and include building a habit of tax compliance.
    Keywords: Economic Development, Governance,
    Date: 2019
  5. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Antoine Malézieux (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Jason Shogren (Departement Economy and Finance, University of Wyoming - UW - University of Wyoming)
    Date: 2019–02–05
  6. By: Ranjan, Priya (University of California, Irvine); Hasan, Rana (Asian Development Bank); Eleazar, Erik Jan (Asian Development Bank)
    Abstract: This paper constructs a theoretical model to study labor market regulations in developing countries within the context of structural transformation. When workers are risk averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) are efficiency enhancing and promote structural transformation. However, regulations that simply create barriers to the dismissal of workers not only impede structural transformation, they also end up reducing the welfare of workers. The implications of some other issues like general regulatory burden, weak state capacity, and minimum wage regulations are analyzed as well. The paper provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not.
    Keywords: dismissal regulations; informal employment; minimum wage; severance payments; structural transformation
    JEL: J38 O12 O17 O57
    Date: 2018–04–16

This nep-iue issue is ©2019 by Catalina Granda Carvajal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.