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Endogenous Corruption and Tax Evasion in a Dynamic Model

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Abstract

When the government provides public services necessary to production tax evasion results in some degree of income redistribution which may imply an higher or a lower level of aggregate income in the longrun. The outcome mainly depends on the burden of …scal pressure. If the tax administration is harmed by corruptibility of some agents then the performance of the economy is also a¤ected by the di¤usion of corruption, its impact depending upon the cost of detecting a bribe agreement. When such cost varies with the stage of development, as it happens if the latter determines the level of transparency, then poverty traps may emerge and the steady state level of income will depend on the initial condition. Some implications of the model are in line with recent empirical evidence.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 154.

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Date of creation: 01 Jan 2006
Date of revision: 01 Nov 2006
Handle: RePEc:sef:csefwp:154

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Keywords: Tax evasion; corruption; public spending; poverty traps;

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  1. Azariadis, Costas & Chakraborty, Shankha, 1999. "Agency Costs in Dynamic Economic Models," Economic Journal, Royal Economic Society, vol. 109(455), pages 222-41, April.
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Cited by:
  1. Djumashev, R, 2007. "Corruption, uncertainty and growth," MPRA Paper 3716, University Library of Munich, Germany.
  2. Ratbek Dzhumashev, 2007. "Corruption, Uncertainty And Growth," Development Research Unit Working Paper Series 15-07, Monash University, Department of Economics.
  3. Rosato, Antonio, 2006. "An Attempt to Control Tax Evasion," MPRA Paper 15084, University Library of Munich, Germany, revised 07 May 2009.
  4. Dzhumashev, Ratbek, 2008. "Corruption and Disposable Risk," MPRA Paper 11772, University Library of Munich, Germany.

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