PapersFlow Research Brief
Taxation and Compliance Studies
Research Guide
What is Taxation and Compliance Studies?
Taxation and Compliance Studies is a field in economics that examines the determinants, consequences, and enforcement strategies related to tax evasion, informal economy, shadow economy, tax compliance, tax morale, corruption, institutional quality, and fiscal policy impacts on the labor market.
The field encompasses 89,501 works analyzing the interplay between formal and informal sectors and the role of enforcement mechanisms in taxpayer behavior. Key topics include tax evasion modeled through economic incentives and penalties, as in Allingham and Sandmo (1972). Research also addresses optimum income taxation designs to balance efficiency and equity, per Mirrlees (1971).
Topic Hierarchy
Research Sub-Topics
Tax Morale and Compliance Determinants
This sub-topic empirically tests intrinsic motivations like fairness perceptions, trust in government, and social norms driving voluntary tax compliance. Researchers use surveys, experiments, and cross-country panels.
Informal Economy Size Estimation Methods
This sub-topic develops and compares macro approaches like MIMIC models, currency demand, and micro firm-level surveys to quantify shadow economy magnitudes. Researchers validate against tax audits and satellite data.
Tax Evasion Experimental Evidence
This sub-topic runs lab and field experiments manipulating audit probabilities, fines, equity, and peer behavior on evasion decisions. Researchers test Allingham-Sandmo predictions and behavioral anomalies.
Corruption and Tax Compliance Interactions
This sub-topic examines how bureaucratic corruption erodes compliance through bribery opportunities and perceived unfairness. Researchers analyze interactions using governance indicators and case studies.
Tax Enforcement Strategies Effectiveness
This sub-topic evaluates impacts of audits, amnesties, digital tracking, and third-party reporting on evasion reduction and deadweight loss. Researchers use difference-in-differences and RCTs.
Why It Matters
Taxation and Compliance Studies informs policy on reducing tax evasion and shadow economies, which affect government revenue and labor markets. Allingham and Sandmo (1972) provide a theoretical model showing that taxpayers weigh detection probabilities and fines against evasion benefits, guiding enforcement strategies. Becker (1968) applies economic analysis to crime, including tax evasion, demonstrating that higher penalties and detection risks deter noncompliance, as evidenced by his framework cited over 13,000 times. Hart (1973) documents informal income opportunities in urban Ghana, revealing how low-income workers engage in shadow activities, which shapes policies in developing economies. These insights support fiscal reforms, such as optimizing tax schedules from Mirrlees (1971), to enhance compliance without distorting labor markets.
Reading Guide
Where to Start
"Income tax evasion: a theoretical analysis" by Allingham and Sandmo (1972), as it provides the foundational expected utility model of evasion decisions central to compliance studies.
Key Papers Explained
Allingham and Sandmo (1972) establish the core evasion model under risk, which Becker (1968) extends via crime economics to emphasize enforcement trade-offs. Mirrlees (1971) builds on these by designing optimal taxes that account for evasion incentives. Hart (1973) applies evasion concepts empirically to informal sectors, while Knack and Keefer (1997) link social capital to compliance-supporting institutions.
Paper Timeline
Most-cited paper highlighted in red. Papers ordered chronologically.
Advanced Directions
Research continues to refine evasion models with behavioral insights, though no recent preprints are available. Current frontiers likely extend Becker (1968) and Allingham-Sandmo frameworks to digital enforcement amid static growth data.
Papers at a Glance
| # | Paper | Year | Venue | Citations | Open Access |
|---|---|---|---|---|---|
| 1 | Separation of Ownership and Control | 1983 | The Journal of Law and... | 18.7K | ✕ |
| 2 | Crime and Punishment: An Economic Approach | 1968 | Journal of Political E... | 13.0K | ✕ |
| 3 | Investment in Human Capital: A Theoretical Analysis | 1962 | Journal of Political E... | 7.8K | ✕ |
| 4 | Does Social Capital Have an Economic Payoff? A Cross-Country I... | 1997 | The Quarterly Journal ... | 7.4K | ✕ |
| 5 | Income tax evasion: a theoretical analysis | 1972 | Journal of Public Econ... | 4.8K | ✕ |
| 6 | Reinventing Government: How the Entrepreneurial Spirit is Tran... | 1995 | Academy of Management ... | 4.6K | ✕ |
| 7 | An Exploration in the Theory of Optimum Income Taxation | 1971 | The Review of Economic... | 4.3K | ✕ |
| 8 | An Exact Consumption-Loan Model of Interest with or without th... | 1958 | Journal of Political E... | 3.5K | ✕ |
| 9 | Fairness as a Constraint on Profit Seeking: Entitlements in th... | 2000 | Cambridge University P... | 3.2K | ✕ |
| 10 | Informal Income Opportunities and Urban Employment in Ghana | 1973 | The Journal of Modern ... | 3.0K | ✕ |
Frequently Asked Questions
What is the economic model of income tax evasion?
Allingham and Sandmo (1972) model tax evasion as a decision under uncertainty where individuals compare expected fines and detection probabilities against evasion gains. Taxpayers evade if the expected utility from evasion exceeds compliance utility. This framework integrates portfolio choice theory with public finance.
How does Becker's economic approach apply to tax compliance?
Becker (1968) treats tax evasion as a rational crime choice based on costs and benefits, including punishment severity and detection odds. Optimal enforcement balances deterrence with resource use. The model predicts higher compliance with increased fines or audits.
What determines optimum income taxation?
Mirrlees (1971) derives optimal tax schedules minimizing deadweight loss while addressing inequality through marginal tax rates. The analysis considers labor supply responses and information constraints. It shows nonlinear taxes are efficient under asymmetric information.
How does social capital relate to tax morale?
Knack and Keefer (1997) find trust and civic norms from World Values Surveys correlate with economic performance across 29 countries, implying higher social capital boosts voluntary compliance. Group memberships do not directly link to trust levels. This supports institutional quality's role in enforcement.
What role does the informal economy play in urban labor markets?
Hart (1973) examines low-income urban workers in Ghana, showing informal opportunities absorb unskilled labor excluded from formal jobs. This sub-proletariat engages in casual work amid high unemployment. Findings highlight shadow economy's scale in developing contexts.
Open Research Questions
- ? How do optimal detection probabilities and fine levels interact to minimize tax evasion costs in modern fiscal systems?
- ? What institutional factors beyond enforcement most strongly predict tax morale variations across countries?
- ? In what ways do informal sector dynamics respond to formal tax policy changes in labor markets?
- ? How can optimum income tax models incorporate behavioral responses like fairness perceptions from Kahneman et al. (2000)?
- ? What enforcement strategies best reduce shadow economy size without harming economic growth?
Recent Trends
The field maintains 89,501 works with no specified 5-year growth rate.
Highly cited classics like Becker with 13,032 citations and Allingham and Sandmo (1972) with 4,753 citations dominate, indicating sustained reliance on foundational theories.
1968No recent preprints or news coverage signal stable rather than rapidly expanding activity.
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