Deterrence Effect of a Higher Fine. 

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... 1 predicts how the type-specific effects aggregate across payment evaders: Some high-type evaders are induced to pay the price, while some low-type evaders are induced to refrain from consumption, as illustrated in Figure 2. Clearly, the reduction of payment evasion depends on the mass of consumers in the relevant regions of the density function. We first look at the evolution of the aggregate number of detected payment evaders over time. Figure 3 covers the time period June 1, 2009 through May 31, 2013 and plots thirty-day moving averages (the fines are adjusted in the middle of the sample period). Inspection of the figure yields the following result. Next, we look at the evolution of the number of payment evaders by type. To do so, we let payment evaders self-select into different subgroups, based on their individual offense history. The self-selection period runs from June 1, 2009 to May 31, 2010. The choice of this period ensures that the selection process is arguably unaffected by the change in fines. In order to have a sufficiently large number of observations in each subgroup, we assign each detected payment evader to one of the following four groups: one offense (1), two and three offenses (2-3), four to seven offenses (4-7), and eight and more offenses ...