Behavioural Economics and Optimal Taxation

The aim of the research I would undertake for my PhD would be to explore the effects of citizens having limited understanding of the taxation system, and responding to it in a way not consistent with the standard full rationality models used in Economics. The research would build on my master's dissertation on this topic, for which I won the best dissertation prize.
The methodology used in this research would be a mixture of mathematical model building and empirical testing using economic data. The models will attempt to build on the existing research in Economics and Psychology on behavioural biases and bounded rationality in decision making. Empirical testing will attempt to distinguish which models of limited rationality best explains the data, and whether they make better predictions than models of full rationality. The data used would be from a mixture of survey methods and administrative data produced by governments and other bodies.
The significance of this research would not only be to increase understanding of taxation and improve government policies, but also to improve understanding of human decision making. Taxation is one of the main government interventions in the economy, and one that affects economic incentives directly. Understanding how people respond to tax incentives is useful for explaining responses to incentives in other areas of economics and social science. Improving our understanding of how limited rationality affects responses to the tax system could also affect our understanding of how limited rationality affects economic and social decision making more widely.