Studying the Elasticity of Taxable Income and Its Functional Form from the Taxpayer Compliance Perspective

Abstract

The dissertation identifies and responds to two gaps in the current literature on the elasticity of taxable income (ETI). Firstly, there is a lack of a deep understanding of the process underlying behavioral responses of taxable income to taxation. Secondly, there is a lack of inquiry into the functional form of the ETI. This dissertation seeks to fill these gaps in the ETI literature. It constructs a theoretical framework for behavioral responses of taxable income to taxation, based on a review of the literature on taxpayer compliance behavior. The dissertation also introduces a new approach to estimating the ETI.

This study is the first attempt to fill in the gap of the ETI for a lack of studying the functional form of the ETI and factors determining the ETI function. Using the functional form derived from the Allingham-Sandmo model and empirical data on the function's arguments in the years 1979, 1982, 1985, and 1988, the dissertation studies behavior of the declared income elasticity function.