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Tax Compliance and Public Goods Provision. An Agent-based Econophysics Approach

Author

Listed:
  • Sascha Hokamp

    (University of Hamburg)

  • Götz Seibold

    (BTU Cottbus)

Abstract

We calculate the dynamics of tax evasion within a multi-agent econophysics model which is adopted from the theory of magnetism and previously has been shown to capture the main characteristics from agent-based based models which build on the standard Allingham and Sandmo approach. In particular, we implement a feedback of public goods provision on the decision-making of selfish agents which aim to pursue their self interest. Our results imply that such a feedback enhances the moral attitude of selfish agents thus reducing the percentage of tax evasion. Two parameters govern the behavior of selfish agents, (i) the rate of adaption to changes in public goods provision and (ii) the threshold of perception of public goods provision. Furtheron we analyze the tax evasion dynamics for different agent compositions and under the feedback of public goods provision. We conclude that policymakers may enhance tax compliance behavior via the threshold of perception by means of targeted public relations.

Suggested Citation

  • Sascha Hokamp & Götz Seibold, 2014. "Tax Compliance and Public Goods Provision. An Agent-based Econophysics Approach," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 6(4), pages 217-236, December.
    • Handle: RePEc:psc:journl:v:6:y:2014:i:4:p:217-236
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    References listed on IDEAS

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    Cited by:

    1. M. L. Bertotti & G. Modanese, 2016. "Mathematical models describing the effects of different tax evasion behaviors," Papers 1701.02662, arXiv.org.
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    3. Gheorghe H. Popescu & Adriana Ana Maria Davidescu & Catalin Huidumac, 2018. "Researching the Main Causes of the Romanian Shadow Economy at the Micro and Macro Levels: Implications for Sustainable Development," Sustainability, MDPI, vol. 10(10), pages 1-37, September.
    4. V.A. Molodykh, 2021. "Impact of Short-Term Exogenous Shocks on Taxpayer Behavior and Tax Evasion," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 20(2), pages 241-268.

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    More about this item

    Keywords

    tax compliance; econophysics; multi-agent model;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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