Tax Evasion as a Global Game (TEGG) in the laboratory

Resumo

Sánchez Villalba (2009) claims tax evasion can be modelled as a global game when income shocks are common and prescribes that the tax agency should audit each individual taxpayer with a probability that is a non-decreasing function of every other taxpayer's declarations ("contingent policy rule"). This paper uses experimental data to test the predictions of the model and finds supporting evidence for the hypothesis that the contingent policy rule is superior to the alternative "cut-off" one. It also finds that data fits the qualitative predictions of the global game model, regarding both participants' decisions and the experiment's comparative statics.