A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected...

Status considerations with respect to consumption give rise to negative externalities because individuals do not take into account that their decisions affect the relative consumption position of others. Further, status concerns create incentives for excessive labour supply in competitive...