Income tax evasion dynamics: Evidence from an agent-based econophysics model

Authored by Michael Pickhardt, Goetz Seibold

Date Published: 2014-02

DOI: 10.1016/j.joep.2013.01.011

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Mathematical description

Model Code URLs: Model code not found

Abstract

We analyze income tax evasion dynamics in a standard model of statistical mechanics, the Ising model of ferromagnetism. However, in contrast to previous research, we use an inhomogeneous multi-dimensional Ising model where the local degrees of freedom (agents) are subject to a specific social temperature and coupled to external fields which govern their social behavior. This new modeling frame allows for analyzing large societies of four different and interacting agent types. As a second novelty, our model may reproduce results from agent-based models that incorporate standard Allingham and Sandrno tax evasion features as well as results from existing two-dimensional Ising based tax evasion models. In this way, such kind of models may become more relevant and useful in economics as well as social psychology. We finally use our model for analyzing income tax evasion dynamics under different enforcement scenarios and point to some policy implications that may also be of interest for psychological research on tax compliance. (C) 2013 Elsevier B.V. All rights reserved.

Tags

econophysics tax evasion Ising model Numerical simulation tax compliance