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Understanding Tax Evasion: Combining the Public Choice and New Institutionalist Perspectives

In: The Palgrave Handbook of Comparative Economics

Author

Listed:
  • Klarita Gërxhani

    (European University Institute)

  • Ronald Wintrobe

    (Western University London)

Abstract

In this chapter, we propose to complement the public choice theory by incorporating insights from new institutionalism and the tax morale literature. More specifically, we show the relation between concepts like trust, social capital, solidarity, and reputation. By focusing on “trust-based political exchange”, we argue that tax evasion is related to the degree to which citizens trust the government to be honest and to provide services promised, and the degree to which they believe their fellow citizens pay their taxes. This is tested using two hypotheses, relating individual tax evasion to the extent to which citizens support the government and believe it is not corrupt and to which they believe others are paying taxes, respectively. The empirical data support the theoretical hypotheses.

Suggested Citation

  • Klarita Gërxhani & Ronald Wintrobe, 2021. "Understanding Tax Evasion: Combining the Public Choice and New Institutionalist Perspectives," Springer Books, in: Elodie Douarin & Oleh Havrylyshyn (ed.), The Palgrave Handbook of Comparative Economics, edition 1, chapter 30, pages 785-810, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-50888-3_30
    DOI: 10.1007/978-3-030-50888-3_30
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    Cited by:

    1. Joshua Commey, 2023. "Conceptualizing Tax Evasion and Tax Compliance Strategies," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(8), pages 169-181, August.
    2. Schram, Arthur & Zheng, Jin Di & Zhuravleva, Tatyana, 2022. "Corruption: A cross-country comparison of contagion and conformism," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 497-518.

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