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Tax Avoidance, Human Capital Accumulation and Economic Growth

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  • María Jesús Freire-Serén
  • Judith Panadés

Abstract

Human capital accumulation may negatively affect economic growth by increasing tax avoidance and reducing effective tax rates and productive public investment. This paper analyzes how the endogenous feedback between human capital accumulation and tax avoidance affects economic growth and macroeconomic dynamics. Our findings show that this interaction produces remarkable growth and welfare effects.

Suggested Citation

  • María Jesús Freire-Serén & Judith Panadés, 2011. "Tax Avoidance, Human Capital Accumulation and Economic Growth," Working Papers 599, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:599
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    References listed on IDEAS

    as
    1. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, pages 621-640.
    2. Ratbek Dzhumashev & Emin Gahramanov, 2010. "A Growth Model with Income Tax Evasion: Some Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 620-636, December.
    3. Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 119-128, March.
    4. Friedrich Schneider, 2005. "Shadow Economies of 145 Countries all over the World: What Do We Really Know?," CREMA Working Paper Series 2005-13, Center for Research in Economics, Management and the Arts (CREMA).
    5. Roubini, Nouriel & Sala-i-Martin, Xavier, 1995. "A growth model of inflation, tax evasion, and financial repression," Journal of Monetary Economics, Elsevier, pages 275-301.
    6. Caballe, Jordi & Panades, Judith, 1997. "Tax Evasion and Economic Growth," Public Finance = Finances publiques, , vol. 52(3-4), pages 318-340.
    7. Dzhumashev, Ratbek & Gahramanov, Emin, 2011. "Comment on "A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth"," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 253-256, March.
    8. Cowell, F A, 1990. "Tax Sheltering and the Cost of Evasion," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 231-243, January.
    9. Mayshar, Joram, 1991. " Taxation with Costly Administration," Scandinavian Journal of Economics, Wiley Blackwell, pages 75-88.
    10. Futagami, Koichi & Morita, Yuichi & Shibata, Akihisa, 1993. " Dynamic Analysis of an Endogenous Growth Model with Public Capital," Scandinavian Journal of Economics, Wiley Blackwell, pages 607-625.
    11. Cerqueti, Roy & Coppier, Raffaella, 2011. "Economic growth, corruption and tax evasion," Economic Modelling, Elsevier, pages 489-500.
    12. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, pages 818-860.
    13. Alan J. Auerbach & Leonard E. Burman & Jonathan Siegel, 1998. "Capital Gains Taxation and Tax Avoidance: New Evidence from Panel Data," NBER Working Papers 6399, National Bureau of Economic Research, Inc.
    14. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    15. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
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    More about this item

    Keywords

    tax avoidance; tax non-compliance; economic growth;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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