Abstract

http://ssrn.com/abstract=2171295
 
 

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Citizenship and Power in an Agent-Based Model of Tax Compliance with Public Expenditure


Paolo Pellizzari


Ca Foscari University of Venice - Department of Economics

Dino Rizzi


Ca Foscari University of Venice - Department of Economics

October 1, 2012

University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 24

Abstract:     
In this paper we present a model of tax compliance with heterogeneous agents who maximize their individual utility based on income and the conjectured level of per capita public expenditure. We formally include psychological drivers in this model. These drivers affect individual behavior, such as risk aversion, together with appreciation of public expenditure, expectations about peers’ compliance and a natural inclination to comply, all of which we summarize in a quality termed “citizenship”. The enforcement system, based on random inspections, is standard and only partially known to agents.

The agent-based model is simulated under a variety of settings, representing different “societies”. We use the artificial data produced by the model to estimate the effects of taxpayers’ traits on personal tax behavior and to build a compliance societal slippery slope. At the individual level, we find a positive dependence of compliance on all variables, with the significant exception of the tax rate, which has a negative impact. As far as societies are concerned, we show how aggregate tax compliance depends on composite indices of citizenship and power, and we find that the former is more important than the latter.

Number of Pages in PDF File: 29

Keywords: Tax evasion, public expenditure, agent-based models, slippery slope model

JEL Classification: H26, H40, C63

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Date posted: November 6, 2012  

Suggested Citation

Pellizzari, Paolo and Rizzi, Dino, Citizenship and Power in an Agent-Based Model of Tax Compliance with Public Expenditure (October 1, 2012). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 24. Available at SSRN: http://ssrn.com/abstract=2171295

Contact Information

Paolo Pellizzari (Contact Author)
Ca Foscari University of Venice - Department of Economics ( email )
Cannaregio 873
Venice, 30121
Italy
Dino Rizzi
Ca Foscari University of Venice - Department of Economics ( email )
Cannaregio 873
Venice, 30121
Italy
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References:  32
Footnotes:  12

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