A theoretical model of excise tax evasion is developed in this paper. The dynamics of a change in tax policy is derived, under the assumption that consumers benefit from a lower price when entering a "black market". However, entry also impose a sunk cost, which gives rise to asymmetric effects and persistence effects on both aggregate demand and on tax revenues. An increase in the tax rate instantaneously brings more entrants into the black market, whereas a tax cut has no short-run effects on the fraction of the population that has access to the black market.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number
1999:19.
Length: 26 pages Date of creation: 01 Nov 1999 Date of revision: Handle: RePEc:hhs:sunrpe:1999_0019
Contact details of provider: Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden Phone: +46 8 16 20 00 Fax: +46 8 16 14 25 Email: Web page: http://www.ne.su.se/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Sten Nyberg).