This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

State Aid Policies and Underground Activities

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Bruno Chiarini
Elisabetta Marzano
Francesco Busato
Pasquale De Angelis

Additional information is available for the following registered author(s):

Abstract

The main goal of this paper is to examine the implications of firm-oriented fiscal policies, such as capital subsidies and tax allowances, in an economy with an underground sector. In addition, we investigate whether the technology structure of “hidden” production may facilitate or counteract the effects of fiscal policies on firm behavior. Among our results we stress the following: first, capital subsidies promote tax evasion; these subsidies induce firms to increase actual capital accumulation (a level effect), but also produce a reduction in the regular share of aggregate capital stock (a composition effect). Second, tax relief reduces underground activities and fosters capital accumulation, as well as aggregate production. Third, the technology structure matters for determining how to allocate resources between formal and informal production, hence the amount of reported revenues.

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.

File URL: http://economia.uniparthenope.it/ise/sito/DP/DP_4_2007.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 4_2007.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 01 Apr 2007
Date of revision:
Handle: RePEc:prt:dpaper:4_2007

Contact details of provider:
Postal: via Medina 40, 80133 I - Napoli
Phone: ++39-81-5512207
Fax: ++39-81-5511140
Email:
Web page: http://economia.uniparthenope.it/ise/sito/index.htm
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Antonietta Milano).

Related research
Keywords: State aid; tax exemptions; capital subsidies; tax evasion; underground production; physical capital accumulation.;

Find related papers by JEL classification:
E26 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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. Benhabib, Jess & Farmer, Roger E.A., 1996. "Indeterminacy and Sector-Specific Externalities," Working Papers 96-12, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  2. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer, vol. 23(4), pages 831-861, May. [Downloadable!] (restricted)
  3. Dan Anderberg & Alessandro Balestrino & Umberto Galmarini, 2003. "Search and Taxation in a Model of Underground Economic Activities," Economic Inquiry, Oxford University Press, vol. 41(4), pages 647-659, October. [Downloadable!] (restricted)
  4. Hibbs Jr., Douglas A. & Piculescu, Violeta, 2005. "Tax Toleration and Tax Compliance: How Government Affects the Propensity of Firms to Enter the Uno¢ cial Economy," Working Papers in Economics 173, Göteborg University, Department of Economics, revised 12 Jun 2006. [Downloadable!]
  5. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December. [Downloadable!] (restricted)
  6. Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May. [Downloadable!] (restricted)
  7. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1981-1), pages 67-140. [Downloadable!]
  8. Loayza, Norman V., 1994. "Labor regulations and the informal economy," Policy Research Working Paper Series 1335, The World Bank. [Downloadable!]
  9. Trandel, Greg & Snow, Arthur, 1999. "Progressive income taxation and the underground economy," Economics Letters, Elsevier, vol. 62(2), pages 217-222, February. [Downloadable!] (restricted)
  10. Bayer, Ralph-C., 2006. "A contest with the taxman - the impact of tax rates on tax evasion and wastefully invested resources," European Economic Review, Elsevier, vol. 50(5), pages 1071-1104, July. [Downloadable!] (restricted)
    Other versions:
  11. Bergström, Fredrik, 1998. "Capital Subsidies and the Performance of Firms," Working Paper Series in Economics and Finance 285, Stockholm School of Economics. [Downloadable!]
  12. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June. [Downloadable!] (restricted)
  13. Isabelle Joumard, 2001. "Tax Systems in European Union Countries," OECD Economics Department Working Papers 301, OECD, Economics Department. [Downloadable!]
  14. Alm, James, 1985. "The Welfare Cost of the Underground Economy," Economic Inquiry, Oxford University Press, vol. 23(2), pages 243-63, April.
  15. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier. [Downloadable!] (restricted)
    Other versions:
  16. Boeri, Tito & Garibaldi, Pietro, 2002. "Shadow Activity and Unemployment in a Depressed Labour Market," CEPR Discussion Papers 3433, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  17. 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)
Full references

Statistics
Access and download statistics

Did you know? You too can volunteer with RePEc.

This page was last updated on 2009-11-10.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.