Can tax evasion tame Leviathan governments?
AbstractThis paper looks at how income tax rates, consumption and public spending respond as venues for tax evasion open or close. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonous as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.
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Bibliographic InfoPaper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2006 with number 2006-19.
Length: 32 pages
Date of creation: Jul 2006
Date of revision:
Leviathan government; income tax; tax evasion; public spending; rent seeking;
Other versions of this item:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-MAC-2006-08-26 (Macroeconomics)
- NEP-PBE-2006-08-26 (Public Economics)
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