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Can tax evasion tame Leviathan governments?

  • Frode Brevik
  • Manfred Gärtner

    ()

This 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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File URL: http://hdl.handle.net/10.1007/s11127-008-9284-z
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Article provided by Springer in its journal Public Choice.

Volume (Year): 136 (2008)
Issue (Month): 1 (July)
Pages: 103-122

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Handle: RePEc:kap:pubcho:v:136:y:2008:i:1:p:103-122
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  1. Persson, T. & Roland, G. & Tabellini, G., 1997. "Comparative Politics and Public Finance," Papers 633, Stockholm - International Economic Studies.
  2. Jan Schnellenbach, 2006. "Tax Morale and the Taming of Leviathan," Constitutional Political Economy, Springer, vol. 17(2), pages 117-132, 06.
  3. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
  4. Harry Huizinga & Søren Bo Nielsen, . "Withholding Taxes or Information Exchange: The Taxation of International Interest Flows," EPRU Working Paper Series 00-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. V.V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report 115, Federal Reserve Bank of Minneapolis.
  6. Robin W. Boadway & Michael Keen, 1993. "Evasion and Time Consistency in the Taxation of Capital Income," Working Papers 890, Queen's University, Department of Economics.
  7. Philippe Bacchetta & María Espinosa, 2000. "Exchange-of-Information Clauses in International Tax Treaties," International Tax and Public Finance, Springer, vol. 7(3), pages 275-293, May.
  8. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  9. Rogers, Carol Ann, 1987. "Expenditure taxes, income taxes, and time-inconsistency," Journal of Public Economics, Elsevier, vol. 32(2), pages 215-230, March.
  10. Bacchetta, Philippe & Espinosa, Maria Paz, 1995. "Information sharing and tax competition among governments," Journal of International Economics, Elsevier, vol. 39(1-2), pages 103-121, August.
  11. 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.
  12. Kollintzas, T. & Philippopoulos, A. & Vasillatos, V., 1999. "Is Tax Policy Coordination Necessary?," Athens University of Economics and Business 110, Athens University of Economics and Business, Department of International and European Economic Studies.
  13. Wolfgang Eggert & Martin Kolmar, 2004. "The Taxation of Financial Capital under Asymmetric Information and the Tax-competition Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(1), pages 83-106, 03.
  14. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  15. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
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