Working Paper Series, Uppsala Center for Fiscal Studies, Department of Economics, Uppsala University
Loss evasion and tax aversion
(), Katarina Nordblom
(), Henry Ohlsson
() and Annika Persson
Abstract: The objective of this paper is to study if taxpayers
behave in a loss averse manner when filing their tax returns. This is
important for tax design but also for understanding human behavior in
general. The predictions of prospect theory can be contrasted to those of
expected utility theory. We use data for 3.6 million Swedish taxpayers for
the income year 2006. Our research method is quasi-experimental using a
regression kink and discontinuity approach. We also use an alternative
instrumental-variables approach. There is strong evidence of loss aversion.
We estimate the coefficient of loss aversion using actual behavior and the
instrument-variables approach. Our estimate is very close to the estimates
reported in the experimental literature.
Keywords: loss aversion; prospect theory; tax compliance; quasi-experiment; regression kink; regression discontinuity; (follow links to similar papers)
JEL-Codes: C21; C26; D03; H24; H26; (follow links to similar papers)
43 pages, November 29, 2011
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- This paper is published as:
Engström, Per, Katarina Nordblom, Henry Ohlsson and Annika Persson, (2015), 'Loss evasion and tax aversion', American Economic Journal: Economic Policy, Vol. 7, pages 132-164
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