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0.4
fixed penalty: h=5
0.3
fixed penalty: h=10
0.2
backaudit: 5 periods, h=4
0.1
solid: France (c=0.2, d=0.15)
dashed: Germany (c=0.05, d=0.15)
0
0
0.05
0.1
0.15
0.2
0.25
a-types
Fig. 4. Black market share for the two parameter sets derived for France (solid lines) and Germany
(dashed lines) as a function of a-type agents. The horizontal lines indicate the size of the shadow
economy in both countries and the intersections (indicated by dots) fix the respective percentage
of a-types. Results are reported for different enforcement mechanisms: fixed compliance period
h = 5 (black), h = 10 (red), and backaudit (blue).
economy for France and Germany as reported by Buehn and Schneider (2012) and the
intersections with the tax evasion curves are indicated by dots for each audit mechanism.
We find that the difference of a-types between both countries which is compatible with
these values (as illustrated by arrows) is between 3% and 5% with the large difference
obtained for the backaudit scheme. Since backauditing is more efficient in reducing
black market services it is compatible with a larger percentage of a-type agents than
audit schemes with fixed compliance period.
4
Policy Recommendations and Discussion
The larger percentage of rational a-types resulting for the parameter set 'F' suggests that
audit mechanisms to combat the shadow economy are more efficient in France than in
Germany. It is also interesting that the difference between rational a-types in both coun-
tries can be traced back to the much larger percentage of c-types in the parameter set
'F'. Inspection of the experiment by Bazart and Pickhardt (2011) reveals that this differ-
ence is due to the larger full compliance ratio for french female subjects (41%) than for
german females (10%) whereas the full compliance ratio between male (France: 4 . 8%,
Germany: 3 . 7%) does not differ significantly. Note, however, that the group sizes in
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