Working Paper: CEPR ID: DP7554
Authors: Chaim Fershtman; Vilen Lipatov
Abstract: People may express their political opinion by adopting different measures of civil disobedience. Tax compliance is an example of an economic decision that may be affected by anti-goverment sentiment. We consider a model in which political opinion as well as tax compliance decisions are both formed as part of a social interaction process in which individuals interact, exchange ideas and observe behavior. Tax compliance is affected by the level of government support and political opinion may be affected by government's auditing policy. The government's role is to set a social spending program which is viewed differently by rich and poor individuals. The paper focuses on the interdependence between tax compliance, government's social policies and political support, embedding this interdependence in a dynamic social interaction process.
Keywords: Political Opinion; Social Interaction; Tax Evasion
JEL Codes: H26; H50; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political opposition (D72) | tax evasion (H26) |
| social interactions (Z13) | tax evasion (H26) |
| government auditing policies (H83) | political opinions (D72) |
| government auditing policies (H83) | tax evasion (H26) |
| social spending policies (H53) | government support (H81) |
| social spending policies (H53) | tax compliance (H26) |