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Tax evasion and financial repression

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  • Gupta, Rangan

Abstract

Using a simple overlapping generations framework, calibrated to four Southern European countries, we analyze the relationship between tax evasion, determined endogenously, and financial repression. We show that higher degree of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of the financial restriction.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 60 (2008)
Issue (Month): 6 ()
Pages: 517-535

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Handle: RePEc:eee:jebusi:v:60:y:2008:i:6:p:517-535

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Web page: http://www.elsevier.com/locate/jeconbus

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Keywords: Underground economy Tax evasion Macroeconomic policy;

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Cited by:
  1. Manoel Bittencourt & Rangan Gupta & Lardo Stander, 2013. "Tax evasion, financial development and inflation: theory and empirical evidence," Working Papers 201316, University of Pretoria, Department of Economics.
  2. Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Working Papers 201001, University of Pretoria, Department of Economics.

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