This article provides a critical evaluation of the competing discourses that variously represent the informal economy as a residue or leftover of some pre-capitalist era, a by-product of a new type of emergent formal economy, an alternative mode of work organization or a complement to the formal...

The conventional portrayal of the formal/informal economy dichotomy endows the formal economy with positive attributes and the informal economy with negative characteristics. Recently, this hierarchy has been inverted by scholars portraying the informal economy positively as a chosen alternative...

An economy is considered where a possibility to seek rents (a particular case of this activity is corruption) exists along with production. A producer is able to hide part of his output from both bribery and taxation. It is shown that the presence of a shadow sector has different effects in...

Why does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall...

Auditing institutions, such as the German Federal Court of Audit (BRH), provide information on public revenue and public spending. The question of how to increase tax compliance has been of frequent interest. Unfortunately, information from German taxpayers? declaration behaviour (beyond the...

This paper studies the effect of endogenous audit probabilities on reporting behavior in a face-to-face compliance situation such as at customs. In an experimental setting in which underreporting has a higher expected payoff than truthful reporting we find an increase in compliance of about 80%...

The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss...

The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki Puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss...

In order to analyze the severity of sentencing, and to show how the probabilistic interpretation of strategic behavior can be tricky, this paper uses the crime strategic model (inspection game) proposed by Tsebelis. This model shows that any attempts to increase the severity of punishment will...

Based on a natural experiment that took place in Ecuador in the context of a capital outflow tax, this paper presents suggestive evidence of the emergence of an abnormal transfer pricing behavior. We exploit the fact that some imports were eligible to a tax-credit measure aiming to offset the...