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Corruption, Tax Revenue and Growth: A Non Linear Relationship?

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  • Raffaella Coppier

    () (Università di Macerata)

Abstract

In this paper we explore tax revenue in a regime of widespread corruption in a static and dynamic framework. We prove that the relationship between tax rate and tax collection is not linear. In astatic context, this may bring about a Laffer-like behavior of overall tax revenue. A higher tax rate, via higher corruption, may reduce revenues. In a dynamic context, this relationship is inverted: tax revenues are high for low and high tax rates, while low for intermediate tax rates. Furthermore we prove that the relationship between the tax rate and growth is not linear.

Suggested Citation

  • Raffaella Coppier, 2006. "Corruption, Tax Revenue and Growth: A Non Linear Relationship?," Rivista di Politica Economica, SIPI Spa, vol. 96(3), pages 243-278, May-June.
  • Handle: RePEc:rpo:ripoec:v:96:y:2006:i:3:p:243-278
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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