This paper presents a structural model of the allocation of time to various non-market activities and market work by couples and single men and women. Parameters are estimated using a sample taken from the UK 2000 Time Use Survey. Own-wage effects are found to be positive for both men and women...

The shadow (underground) economy plays a major role in many countries. People evade taxes and regulations by working in the shadow economy or by employing people illegally. On the one hand, this unregulated economic activity can result in reduced tax revenue and public goods and services, lower...

Several studies examine the effect of tax rates on households’ labor supply decisions in attempts to account for observed differences in work hours across countries. Interestingly, these studies fail to consider a fundamental action associated with taxation: tax evasion. This paper introduces,...

Under individual taxation with progressive marginal tax rates, households in which the distribution of income is unequal benefit from attributing income to the lower income household member. Self-employment provides greater potential to `split' income in this way because of the absence of a...

Motivated by the observation that access to evasion opportunities is distributed heterogeneously across the labor market, this paper examines the extent to which labor supply elasticities with respect to tax rates depend on such evasion opportunities. We first discuss the channels through which...

This article studies how social insurance programs shape individual's incentives to take up registered employment and to report earnings to the tax authorities. The analysis is based on a social insurance reform in Uruguay that extended healthcare coverage to the dependent children of registered...

This paper examines whether investment in a risky asset depends on future circumstances. We conduct a laboratory experiment where subjects have the opportunity to invest earned income in a risky asset and, depending on randomly assigned treatment states, have the opportunity to respond to the...

Mental accounting practices of self-employed taxpayers are investigated in two studies. Interviews (N=30) revealed that perceptions of the tax due differ widely. While a majority mentally segregate the tax component from their net income, others claim ownership of the gross income as a whole and...

Tax compliance in a between-subjects experiment was higher when the uncertainty about the occurrence of an audit was not resolved until three weeks after participants had filed their tax returns than in a control treatment with immediate uncertainty resolution. Results have important...

We show that an increase in uncertainty about the probability of being audited (ambiguity) increases tax compliance for ambiguity-averse taxpayers but reduces compliance for ambiguity lovers. Because experimental evidence reveals considerable heterogeneity with respect to ambiguity preferences,...