Costly Tax Enforcement and Financial Repression: A Reconsideration Using an Endogenous Growth Model
AbstractUsing a monetary endogenous growth overlapping generations model characterized by financial repression, purposeful government expenditures and costly tax enforcement, we analyze whether financial repression can be explained by the cost involved in raising taxes. Note financial repression is modeled via ``high" obligatory reserve requirements that banks in the economy need to hold. We show that higher costs of tax collection produces a monotonic increase in reserve requirements. Moreover, the government tends to rely more on indirect taxation, compared to direct taxation, as costs of tax collection increases.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200820.
Length: 18 pages
Date of creation: Jun 2008
Date of revision:
Costly tax Enforcement; Financial Repression; Endogenous Growth; Overlapping Generations Model;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-05 (All new papers)
- NEP-DGE-2008-07-05 (Dynamic General Equilibrium)
- NEP-MAC-2008-07-05 (Macroeconomics)
- NEP-PBE-2008-07-05 (Public Economics)
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