Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 25/2006: Study on labor supply when tax evasion is an option with Box-Cox functional forms and random parameters

Tiziano Razzolini ()
Additional contact information
Tiziano Razzolini: Department of Economics, Postal: University of Turin , via real Collegio 30, 10024 Moncalieri, Turin

Abstract: Labour supply when tax evasion is an option is analysed within a discrete choice framework which incorporates random parameters and Box-Cox functional forms, using mixed logit models. Deviates in parameters and, in some cases, correlation between alternatives in the evasion group are found to be significant. The models utilized yield good predictions in terms of labour supply and taxes paid by nonevaders. The goodness of fit and quality of prediction is improved by the introduction of correlation between random coefficients.

Keywords: Labour supply; tax evasion; mixed logit model

JEL-codes: C25; H26; J22

39 pages, December 1, 2006

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