Hibbs Jr., Douglas A. () (CEFOS, Göteborg University) Piculescu, Violeta () (Department of Economics, School of Economics and Commercial Law, Göteborg University)
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How do government-supplied institutional benefits and the taxation and regulation of produc- ers affect the propensity of private firms to enter the unofficial economy and evade taxation? We propose a model in which the incentive of firms to operate underground depends on tax rates relative to firm-specific thresholds of tax toleration that are decisively affected by quality of governance - in particular by the presence of high-grade institutions delivering services enhancing official production that anchor profit-maximizing firms to the official economy. Some key predictions of the model concerning the determinants of firms' tax toleration and tax compliance receive broad support from empirical analyses of enterprise-level data from the World Bank's World Business Environment Surveys.
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Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number
173.
Length: 32 pages Date of creation: 23 Aug 2005 Date of revision:
12 Jun 2006 Publication status: Forthcoming in American Journal of Political Science, 2010. Handle: RePEc:hhs:gunwpe:0173
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden Phone: 031-773 10 00 Web page: http://www.handels.gu.se/econ/ More information through EDIRC
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Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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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.:
Jay Pil Choi & Marcel Thum, 2005.
"Corruption And The Shadow Economy,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 817-836, 08.
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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.)
Bruno Chiarini & Elisabetta Marzano & Francesco Busato & Pasquale De Angelis, 2007.
"State Aid Policies and Underground Activities,"
Discussion Papers
4_2007, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
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