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Tax evasion, tax corruption and stochastic growth

Listed author(s):
  • Fred Célimène
  • Gilles Dufrénot

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Gisèle Mophou
  • Gaston N'Guérékata

    ()

    (Department of Mathematics, Morgan State University - Morgan State University)

This paper presents a continuous time stochastic growth model to study the effects of tax evasion and tax corruption on the level and volatility of private investment and public spending that are both factors of growth. The model highlights several channels through which the mean and volatility of these variables are affected. We first stress the role of equity markets, showing that the evasion outcome for the private sector is not necessarily viewed as a burden. Equity market performs here have the same role as a policy of tax exemption. In societies in which the share of private investment in percentage of GDP is growing, in which tax cheaters usually choose to shelter the proceeds of their illegal activities from the official financial institutions, and in which the productivity of public spending is often low, tax evasion and tax corruption may contribute to the development of private capital if people find an opportunity to invest the proceeds of their illegal activities in equity markets.

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Paper provided by HAL in its series Post-Print with number hal-01447874.

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Date of creation: Jan 2016
Publication status: Published in Economic Modelling, 2016, Special Issue on Recent Developments in Decision-Making, Monetary Policy and Financial Markets, 52 (Part A), pp.251--258. 〈10.1016/j.econmod.2014.10.055〉
Handle: RePEc:hal:journl:hal-01447874
DOI: 10.1016/j.econmod.2014.10.055
Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01447874
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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