Solving the Yitzhaki Paradox: Income Tax Evasion and Reference Dependence under Prospect Theory
type: Distribution
access URL: https://shs.hal.science/halshs-00793664
format: HTML
issued: 2026-05-14T05:15:00.176744
modified: 2026-05-14T05:15:00.139909

Solving the Yitzhaki Paradox: Income Tax Evasion and Reference Dependence under Prospect Theory
type: Dataset
contact point: Organization
  fn: CCSD
keyword: shsecohumanities-and-social-scienceseconomics-and-finance
keyword: infoeu-reposemanticspreprint
keyword: prospect-theory
keyword: preprints-working-papers-
keyword: decision-weights
keyword: reference-dependence
keyword: tax-evasion
landing page: https://shs.hal.science/halshs-00793664
description: This paper examines the determinants of tax evasion under prospect theory. For prospect theory, reference dependence is a fundamental element (the utility function depends on gains and losses relative to a reference point and not on final wealths as in expected utility theory). In order to identify the determinants of the income tax evasion decision, a general reference income is used. We show that results obtained under expected utility theory are not robust. In particular, tax evasion is increasing in the tax rate as soon as a suitable relative risk aversion measure is larger with auditing, than without. With this simple and testable condition, prospect theory provides a general framework consistent with empirical evidence for the tax evasion behaviour problem.
issued: 2026-05-14T05:15:00.159040
language: en
modified: 2026-05-14T05:15:00.159045

test_moissonnage_selune
type: Agent