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Political Support and Tax Compliance: A Social Interaction Approach

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  • Fershtman, Chaim
  • Lipatov, Vilen

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.

Suggested Citation

  • Fershtman, Chaim & Lipatov, Vilen, 2009. "Political Support and Tax Compliance: A Social Interaction Approach," Foerder Institute for Economic Research Working Papers 275731, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275731
    DOI: 10.22004/ag.econ.275731
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    References listed on IDEAS

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    1. Edward L. Glaeser & Bruce Sacerdote & José A. Scheinkman, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 507-548.
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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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