Evolutionary Dynamics of Tax Compliance Under Institutional Trust
1Fuzhou University of International Studies and Trade
Yildiz Social Science Review 2026, Vol. 12, Issue 1, pp. 1-14; doi.org/10.51803/yssr.1831209
Abstract
This study investigates the evolutionary dynamics of tax compliance in an agent-based Public Goods Game (PGG) framework, where institutional trust (T) conceptually informed by the World Bank Governance Indicators (WGI) enters as an exogenously specified parameter that modulates the perceived return to public good provision We develop an Agent-Based Model (ABM) using the Mesa framework, where institutional trust (T) modulates the perceived return on public goods, thereby affecting the evolutionary payoff of compliant agents. Simulation results demonstrate that institutional trust acts as a strategic complement to deterrence. In high-trust environments (T=0.8), high compliance rates (PC* > 0.9) are achieved with minimal enforcement effort, while low-trust environments (T=0.2) require disproportionately high fine rates (f > 8.0) to maintain even moderate compliance. The findings provide a dynamic validation of the Slippery Slope Framework, showing that the effectiveness of coercive power is fundamentally mediated by institutional legitimacy. The study concludes that prioritizing governance quality is the most efficient long-term strategy for fostering stable tax compliance, shifting the policy focus from mere deterrence to building a robust social contract.
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LYU, J. Evolutionary Dynamics of Tax Compliance Under Institutional Trust. Yildiz Social Science Review 2026, Vol. 12, pp. 1-14. https://doi.org/10.51803/yssr.1831209
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