Social Behaviors, Enforcement, and Compliance Dynamics
47 Pages Posted: 2 Mar 2000
Date Written: February 10, 2000
This paper provides a theoretical analysis of the impact of social norms and enforcement regime on the dynamics of taxpayer compliance. An aggregate-level model, inspired by epidemic models in mathematical biology, is developed to evaluate the flows between classes of compliant and noncompliant taxpayers. Convergence in theoretical results is sought and found via a second model that emphasizes micro-level agent behavior. Several interesting observations arise from our analysis. In particular, the impact of changing enforcement levels on compliance depends upon whether the initial population is relatively compliant or non-compliant. Compliant populations are insensitive to changes in enforcement policies until the policies become sufficiently lax. Then a sudden shift to high levels of noncompliance is observed. In contrast, relatively noncompliant populations respond to increased enforcement severity by gradually increasing compliance. Then, when enforcement becomes sufficiently harsh, a sudden shift in aggregate behavior is observed, to very high levels of compliance. Once the discontinuous shift in behavior (from compliance to noncompliance or vice versa) occurs, our models predict that a return to the enforcement policy existing immediately before the change in behavior will be insufficient to cause the population to return to its previous state. Finally, over a range of compliance levels, two equilibria are observed that are dependent on the initial compliance behavior of the population. This is consistent with the observation that compliance varies considerably across time and geographically under similar enforcement regimes.
JEL Classification: C62, C63, H26, K42, M4, Z13
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Asset Pricing Under Endogenous Expectations in an Artificial Stock Market
By W. Brian Arthur, John H. Holland, ...
The Dow Theory: William Peter Hamilton's Track Record Re-Considered
By Stephen J. Brown, Alok Kumar, ...
Agent-Based Computational Economics: Growing Economies from the Bottom Up
Agent-Based Models of Financial Markets: A Comparison with Experimental Markets
By Tomaso Poggio, Andrew W. Lo, ...
When the Bubble is Going to Burst
By Jing Chen
What If Hayek Goes Shopping in the Bazaar
By Marco Lamieri and Enrico Bertacchini
Reviewing Agent-Based Modelling of Socio-Ecosystems: A Methodology for the Analysis of Climate Change Adaptation and Sustainability
By Stefano Balbi and Carlo Giupponi
Automated Trading with Boosting and Expert Weighting
By Germán G. Creamer and Yoav Freund
Integrated Assessment Modeling: Modules for Cooperation
By Carlo Jaeger, Marian Leimbach, ...