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An OLG Model of Tax Evasion with Public Capital

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Author Info
Manoj Atolia () (Department of Economics, Florida State University)

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Abstract

The paper presents a dynamic overlapping generations model of tax evasion where government revenue is used to provide public capital. It establishes existence and uniqueness of the competitive equilibrium and presents a detailed characterization of its dynamics. An increase in the probability of being caught, and the penal tax rate reduces tax evasion along the entire equilibrium path - a result that holds in the existing models in the literature across steady states. In the extended small open economy model with tariff on imported capital, distortions due to tax evasion wipe out the gains from the tariff reform.

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File URL: ftp://econpapers.fsu.edu/RePEc/fsu/wpaper/wp2003_04_01.pdf
File Format: application/pdf
File Function: First version, 2003-04
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Publisher Info
Paper provided by Department of Economics, Florida State University in its series Working Papers with number wp2003_04_01.

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Length: 33
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:fsu:wpaper:wp2003_04_01

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Related research
Keywords: Trade Reform; Welfare Analysis; Public Investment; Tax Evasion;

Find related papers by JEL classification:
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467. [Downloadable!] (restricted)
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    Other versions:
  3. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May. [Downloadable!] (restricted)
  4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
    Other versions:
  5. Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346. [Downloadable!] (restricted)
  6. Glomm, Gerhard & Ravikumar, B., 1999. "Competitive equilibrium and public investment plans1," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1207-1224, August. [Downloadable!] (restricted)
  7. Landskroner, Yoram & Paroush, J & Swary, Itzhak, 1990. "Tax Evasion and Portfolio Decisions," Public Finance = Finances publiques, , vol. 45(3), pages 409-22.
  8. Ai, Chunrong & Cassou, Steven P, 1995. "A Normative Analysis of Public Capital," Applied Economics, Taylor and Francis Journals, vol. 27(12), pages 1201-09, December.
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  10. Steven N. Durlauf & Paul A. Johnson, 1992. "Local Versus Global Convergence Across National Economies," NBER Working Papers 3996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
  13. Lynde, Catherine & Richmond, J, 1993. "Public Capital and Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 401-14, May. [Downloadable!] (restricted)
  14. David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, vol. 74, pages 353. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rangan Gupta & Emmanuel Ziramba, 2008. "Misalignment in the Growth-Maximizing Policies under Alternative Assumptions of Tax Evasion," Working Papers 200819, University of Pretoria, Department of Economics. [Downloadable!]
  2. Rangan Gupta & Emmanuel Ziramba, 2008. "Tax Evasion and Financial Repression: A Reconsideration Using Endogenous Growth Models," Working Papers 200808, University of Pretoria, Department of Economics.
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