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The Friedman rule in an overlapping-generations model with nonlinear taxation and income misreporting

  • Gahvari, Firouz

    ()

    (Department of Economics)

  • Micheletto, Luca

    ()

    (Uppsala Center for Fiscal Studies)

This paper models an overlapping-generations economy that includes money and is populated with individuals of different skills. They face a nonlinear income tax schedule and can engage in tax evasion. Money serves two purposes: the traditional one, modeled through a money-in-the-utility-function, and to facilitate tax evasion. It shows that income tax evasion leads to the violation of the Friedman rule that will otherwise hold.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2012:9.

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Length: 36 pages
Date of creation: 27 Jun 2012
Date of revision: 05 Jun 2014
Publication status: Published as Gahvari, Firouz and Luca Micheletto, 'The Friedman rule in an overlapping-generations model with nonlinear taxation and income misreporting' in Journal of Public Economics , 2014, pages 10-23.
Handle: RePEc:hhs:uufswp:2012_009
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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