Piolatto, A. and Rablen, M.D. orcid.org/0000-0002-3521-096X (2017) Prospect theory and tax evasion: a reconsideration of the Yitzhaki puzzle. Theory and Decision, 82 (4). pp. 543-565. ISSN 0040-5833
Abstract
The standard expected utility (EUT) model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). Recent literature shows cases in which incorporating prospect theory (PT) does and does not overturn the Puzzle. In a general environment that nests both PT and EUT preferences, we provide a detailed study of how the elements of PT affect the Puzzle. PT does not always reverse the Puzzle, hence we give and interpret conditions for when it does and does not. When allowing for stigma and/or variable audit probability, PT reverses the Puzzle in the same way and with the same limitations as does EUT, if equally augmented.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s) 2016. This article is published with open access at Springerlink.com. |
Keywords: | Prospect theory; Tax evasion; Yitzhaki puzzle; StigmaDiminishing sensitivity; Reference dependence; Variable audit probability; Endogenous reference level |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 15 Nov 2016 09:49 |
Last Modified: | 16 Jan 2020 10:40 |
Published Version: | http://dx.doi.org/10.1007/s11238-016-9581-9 |
Status: | Published |
Publisher: | Springer Verlag (Germany) |
Refereed: | Yes |
Identification Number: | 10.1007/s11238-016-9581-9 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:106840 |