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Tax Evasion and Dynamic Inefficiency

Author

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  • Emin Gahramanov

    () (Deakin University)

Abstract

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.

Suggested Citation

  • Emin Gahramanov, 2009. "Tax Evasion and Dynamic Inefficiency," Economics Bulletin, AccessEcon, vol. 29(1), pages 437-443.
  • Handle: RePEc:ebl:ecbull:eb-08d90011
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I1-P45.pdf
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    References listed on IDEAS

    as
    1. María-José Gutiérrez, 2008. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 563-594, August.
    2. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," Review of Economic Studies, Oxford University Press, pages 1-19.
    3. Emmanuel Thibault & Bruno Decreuse, 2001. "Labor productivity and dynamic efficiency," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-6.
    4. Alm, James & Bahl, Roy & Murray, Matthew N., 1993. "Audit selection and income tax underreporting in the tax compliance game," Journal of Development Economics, Elsevier, pages 1-33.
    5. 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.
    6. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, pages 25-48.
    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. Partha Sengupta, 1998. "Tax evasion and intertemporal choice," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 420-430.
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    Cited by:

    1. Laopodis, Nikiforos T. & Merika, Anna A. & Triantafillou, Annie, 2016. "Unraveling the political budget cycle nexus in Greece," Research in International Business and Finance, Elsevier, pages 13-27.

    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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