1. Decisions under uncertainty Example: Labor supply and tax evasion

2. Nested structure Honest or evader? Given honest: Hours supplied Given evader: Hours supplied in the regular as well as in the irregular market

3. Given honest strategy Budget constraint

4. Given honest strategy Random utility function

5. Given honest strategy Expected indirect utlity

6. Given honest strategy Conditional choice probability,

7. Given honset strategy Clogit probability

8. Given evasion strategy Budget constraint, detected

9. Given evasion strategy Budget constraint, not detected

10. Given evasion strategy Rank-dependent expected utlity

11. Given evasions strategy Given a>0

12. Given evasion strategy Given a>0

13. Given evasion strategy Random utility function

14. Given evasion strategy Expected indirect utility

15. Given evasion strategy Conditional choice probability

16. Honesty or evasion? The choice probabilities

17. Norm and opportunity density G(z)=exp(zg) The choice probabilities are weighted choice probabilities

18. Choice probabilities Unconditional probabilities

19. The likelihood

20. Empirical specification Deterministic part of the utility function

21. Variables in the utility function C= disposable household income h=annual hours worked X1=age in years X2=1if female, =0 if male

22. Variables in opportunity density Z1=1 if the the individua thinks that tax evasion is accepted in society, =0 else Z2=1 if the individual works in the construction sector, =0 else Z3=1 if the individual works in the public sector,=0 else

23. Variables/parameter s CoefficientEstimatest-values C, constant 00 3.01767.9 C,exponent 0.71969.4 Leisure, constant 00 10.54023.5 Leisure age 11 0.02610.5 Leisure female 22 3.23742.9 Rank-dependencea0.35671.8 Opportunity,constan t g0g0 -4.8401-16.8 Opportunity, bad norm g1g1 0.97093.3 Opportunity construction g2g2 1.20293.2 Opportunity publicg3g3 -0.6427-0.8 Number of observations 626 Log-likelihood-1068 McFaddens rho0.54 Source: Kristine von Simson, Skatteunndragelse og arbeidstilbud, Masteroppgave, 2005, surveydata 2003