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.:
- Gilles Saint-Paul, 1992.
"Fiscal Policy in an Endogenous Growth Model,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(4), pages 1243-1259.
- Saint-Paul, G., 1991. "Fiscal Policy In An Endogenous Growth Model," DELTA Working Papers 91-04, DELTA (Ecole normale supérieure).
- Barreto, Raul A., 2000. "Endogenous corruption in a neoclassical growth model," European Economic Review, Elsevier, vol. 44(1), pages 35-60, January.
- Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 645-661.
- Robert J. Barro & Xavier Sala-i-Martin, 1990. "Public Finance in Models of Economic Growth," NBER Working Papers 3362, National Bureau of Economic Research, Inc.
- 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.
- Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
- 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 944-956, November.
- Hartwick, John M., 1992. "Endogenous growth with public education," Economics Letters, Elsevier, vol. 39(4), pages 493-497, August.
- 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.
- 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 818-834, August.
- 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 249-268, May. Full references (including those not matched with items on IDEAS)