Corruption, Optimal Taxation, and Growth
How does the presence of corruption affect the optimal mix between consumption and income taxation? In this article, the authors examine this issue using a simple neoclassical growth model, with a self-seeking and corrupt public sector. They find that the optimal tax mix in a corrupt economy is one that relies more heavily on consumption taxes than on income taxes, relative to an economy without corruption. Their model also allows them to investigate the effect of corruption on the optimal (or welfare-maximizing) size of government, and their results indicate that the optimal size of government balances the wishes of the corrupt public sector for a larger government, and so greater opportunities for corruption, with those in the private sector who prefer a smaller government. Not surprisingly, the optimal size of government is smaller in an economy with corruption than in one without corruption.
Volume (Year): 31 (2003)
Issue (Month): 3 (May)
|Contact details of provider:|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Saint-Paul, G., 1991.
"Fiscal Policy In An Endogenous Growth Model,"
DELTA Working Papers
91-04, DELTA (Ecole normale supérieure).
- Hartwick, John M., 1992. "Endogenous growth with public education," Economics Letters, Elsevier, vol. 39(4), pages 493-497, August.
- Barro, Robert J. & Sala-i-Martin, Xavier, 1992.
"Public Finance in Models of Economic Growth,"
CEPR Discussion Papers
630, C.E.P.R. Discussion Papers.
- Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
- Devereux, Michael B & Mansoorian, Arman, 1992. "International Fiscal Policy Coordination and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 249-68, May.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Pual Pecorino, 1992. "Rent Seeking and Growth: The Case of Growth through Human Capital Accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 944-56, November.
- Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
- Barreto, Raul A., 2000. "Endogenous corruption in a neoclassical growth model," European Economic Review, Elsevier, vol. 44(1), pages 35-60, January.
When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:31:y:2003:i:3:p:207-240. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)
If references are entirely missing, you can add them using this form.