Social behaviors, enforcement, and tax compliance dynamics

Jon S. Davis, Gary Hecht, Jon D. Perkins

Research output: Contribution to journalReview articlepeer-review


We analyze the effect of social norms and enforcement on the dynamics of taxpayer compliance. Specifically, we develop two models to evaluate the movement between classes of compliant and noncompliant tax-payers. Our analysis suggests that the effect on compliance of changing enforcement levels depends on whether the taxpayer population is initially compliant or noncompliant. Compliant populations are insensitive to changes in enforcement policies until enforcement becomes sufficiently lax, when we observe a sudden shift to high levels of noncompliance in equilibrium. In contrast, relatively noncompliant populations respond to increased enforcement by gradually increasing compliance. Then, when enforcement becomes sufficiently harsh, we find a sudden shift in equilibrium to very high levels of compliance. After the taxpayer population shifts from compliance to noncompliance, or vice versa, our models predict that returning to the previous enforcement policy will not cause the population to return to its previous state. On the whole, our models' results help explain why taxpayer compliance varies across time and across geographic regions, even under similar enforcement regimes.

Original languageEnglish (US)
Pages (from-to)39-69
Number of pages31
JournalAccounting Review
Issue number1
StatePublished - Jan 2003


  • Agent-based modeling
  • Nonlinear dynamics
  • Regulation
  • Tax compliance

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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