Study on labour supply when tax evasion is an option with Box-Cox functional forms and random parameters.

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 non- evaders. The goodness of fit and quality of prediction is improved by the introduction of correlation between random coefficients.