Erling Eide, Kristine Von Simson, Steinar Strøm

Rank-Dependent Utility, Tax Evasion, and Labor Supply

Section: Articles
FinanzArchiv (FA)

Volume 67 () / Issue 3, pp. 261-281 (21)

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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.

Erling Eide No current data available.

Kristine Von Simson No current data available.

Steinar Strøm No current data available.