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Social networks and occupational choice : the endogenous formation of attitudes and beliefs about tax compliance.

Hashimzade, N. and Myles, G.D. and Page, F. and Rablen, M. (2014) 'Social networks and occupational choice : the endogenous formation of attitudes and beliefs about tax compliance.', Journal of economic psychology., 40 . pp. 134-146.

Abstract

The paper analyses the emergence of group-specific attitudes and beliefs about tax compliance when individuals interact in a social network. It develops a model in which taxpayers possess a range of individual characteristics – including attitude to risk, potential for success in self-employment, and the weight attached to the social custom for honesty – and make an occupational choice based on these characteristics. Occupations differ in the possibility for evading tax. The social network determines which taxpayers are linked, and information about auditing and compliance is transmitted at meetings between linked taxpayers. Using agent-based simulations, the analysis demonstrates how attitudes and beliefs endogenously emerge that differ across sub-groups of the population. Compliance behaviour is different across occupational groups, and this is reinforced by the development of group-specific attitudes and beliefs. Taxpayers self-select into occupations according to the degree of risk aversion, the subjective probability of audit is sustained above the objective probability, and the weight attached to the social custom differs across occupations. These factors combine to lead to compliance levels that differ across occupations.

Item Type:Article
Additional Information:Special Issue on the Dynamics of Tax Evasion.
Full text:(AM) Accepted Manuscript
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Status:Peer-reviewed
Publisher Web site:http://dx.doi.org/10.1016/j.joep.2012.09.002
Publisher statement:NOTICE: this is the author’s version of a work that was accepted for publication in Journal of economic psychology. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of economic psychology, 40, 2014, 10.1016/j.joep.2012.09.002
Record Created:20 Aug 2013 11:35
Last Modified:25 Mar 2014 15:38

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