The pedagogy of tax evasion: Its extent and its determinants

This pedagogical note develops a model of individual choice and a comprehensible and functionally realistic framework that explains how the size of the underground economy or the extent of aggregate income tax evasion can be estimated. It also describes three models for estimating the size of the underground economy for the U. S, and provides a formal but easily understood analytical model of determinants of the extent of aggregate income tax evasion. The latter model is useful in serving as the basis for empirical estimates of determinants of income tax evasion and is useful in enhancing student understanding economic behavior through student projects. (JEL A23, H26).