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Tax Evasion and Dynamic Inefficiency

  • Emin Gahramanov

    ()

    (Deakin University)

I show within a two-period overlapping generations model with income tax evasion that when the penalty rate set by the government is su¢ ciently small, it is theoretically possible for the capital stock to exceed the golden-rule level on the balanced-growth path. However, such a dynamic inefficiency cannot be guaranteed when the probability of evasion detection is nil.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I1-P45.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 1 ()
Pages: 437-443

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Handle: RePEc:ebl:ecbull:eb-08d90011
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  1. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
  2. Gutiérrez Huerta, María José, 2002. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," DFAEII Working Papers 2002-23, University of the Basque Country - Department of Foundations of Economic Analysis II.
  3. Partha Sengupta, 1998. "Tax evasion and intertemporal choice," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(4), pages 420-430, December.
  4. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1986. "Assessing Dynamic Efficiency: Theory and Evidence," NBER Working Papers 2097, National Bureau of Economic Research, Inc.
  5. Emmanuel Thibault & Bruno Decreuse, 2001. "Labor productivity and dynamic efficiency," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-6.
  6. Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, vol. 42(1), pages 1-33, October.
  7. Rangan Gupta, 2005. "Endogenous Tax Evasion and Reserve Requirements: A Comparative Study in the Context of European Economies," Computing in Economics and Finance 2005 328, Society for Computational Economics.
  8. Been-Lon Chen, 2003. "Tax Evasion in a Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 381-403, April.
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