No abstract

Observed levels of tax compliance are higher than predicted levels (when predictions are based on Allingham and Sandmo's neoclassical model of tax evasion). They are higher if social norms recognise the importance of compliance. But how do social norms frame decisions to pay tax? Can prospect theory be applied to shed insight into the way that social norms exert their influence? An analysis of questionnaire responses (from Italy and from the UK) suggests that they exert their influence by changing the reference points that individuals use when they code changes as 'gains', or 'losses'. The evidence suggests that social norms frame the decision to pay tax by changing individuals' perceptions of their entitlement to income. This consideration is important when designing policy to deter evasion.

No abstract

In its purest form a collective good is said to possess the characteristics of non-rivalness in consumption and non-price exclusion. Non-rivalness implies that consumption to the full by one person in no way impedes the consumption of that same quantity by others. This does not mean that the same subjective benefit is derived by each individual, but simply that consumption by one individual does not interfere with the benefits derived by another. The characteristic of non-exclusion requires that if the good is provided to one then it is provided to all. It is this attribute in particular which casts doubt on the likelihood that, in a large group, individuals will voluntarily reveal their preferences for the good. Goods which are not perfectly rival but which are price exclusive may be provided in the market by clubs. However, when an individual's consumption of a good is not dependent on his making a contribution to its provision the individual utility maximizer may be inclined to ‘free ride’, in the hope of enjoying the good at no personal expense. It is clear that if all individuals act in the same manner this good is not likely to be provided in the private market.

The original version of this Article contained an error in the spelling of the author Laurence Faivre, which was incorrectly given as Laurence Faive. This has now been corrected in both the PDF and HTML versions of the Article.