IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Indeterminacy, Underground Activities and Tax Evasion

  • Francesco Busato
  • Bruno Chiarini
  • Enrico Marchetti

This paper introduces underground activities and tax evasion into a one sector dynamic general equilibrium model with external effects. The model presents a novel mechanism driving the self-fulfilling prophecies, which is triggered by the reallocation of resources to the underground sector to avoid the excess tax burden. This mechanism differs from the customary one, and it is complementary to it. In addition, the explicit introduction of an (even tiny) underground sector allows to reduce aggregate degree of increasing returns required for indeterminacy, and for having well behaved input demand schedules (in the sense they slope down).

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://ftp.igier.uni-bocconi.it/wp/2005/289.pdf
Our checks indicate that this address may not be valid because: 500 Failed to connect to FTP server ftp.igier.uni-bocconi.it: Net::FTP: Bad hostname 'ftp.igier.uni-bocconi.it'. If this is indeed the case, please notify ()


Download Restriction: no

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 289.

as
in new window

Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:igi:igierp:289
Contact details of provider: Postal: via Rontgen, 1 - 20136 Milano (Italy)
Phone: 0039-02-58363301
Fax: 0039-02-58363302
Web page: http://www.igier.unibocconi.it/

Order Information: Web: http://www.igier.unibocconi.it/en/papers/index.htm Email:


References listed on IDEAS
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.:

as in new window
  1. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  2. Benhabib, Jess & Farmer, Roger E. A., 1996. "Indeterminacy and sector-specific externalities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 421-443, June.
  3. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  4. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  5. Guo, Jang-Ting & Lansing, Kevin J., 1998. "Indeterminacy and Stabilization Policy," Journal of Economic Theory, Elsevier, vol. 82(2), pages 481-490, October.
  6. Jang-Ting Guo & Kevin J. Lansing, 2007. "Maintenance expenditures and indeterminacy under increasing returns to scale," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(2), pages 147-158.
  7. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  8. Timothy J. Kehoe & David K. Levine & Paul M. Romer, 1990. "On characterizing equilibria of economies with externalities and taxes as solutions to optimization problems," Working Papers 436, Federal Reserve Bank of Minneapolis.
  9. Ghosal, Vivek, 1991. "Demand Uncertainty and the Capital-Labor Ratio: Evidence from the U.S. Manufacturing Sector," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 157-61, February.
  10. Sbordone, Argia M, 1997. "Interpreting the Procyclical Productivity of Manufacturing Sectors: External Effects or Labor Hoarding?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 26-45, February.
  11. Roberto Perli, . "Indeterminacy, Home Production, and the Business Cycle: a Calibrated Analysis," CARESS Working Papres 97-4, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  12. Giavazzi, Francesco & Pagano, Marco, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," CEPR Discussion Papers 1284, C.E.P.R. Discussion Papers.
  13. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc.
  14. Campbell, John, 1994. "Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model," Scholarly Articles 3196342, Harvard University Department of Economics.
  15. Miguel Jimenez & Domenico Marchetti, 2002. "Interpreting the procyclical productivity of manufacturing sectors: can we really rule out external effects?," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 805-817.
  16. Boldrin, Michele & Rustichini, Aldo, 1994. "Growth and Indeterminacy in Dynamic Models with Externalities," Econometrica, Econometric Society, vol. 62(2), pages 323-42, March.
  17. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer, vol. 23(4), pages 831-861, May.
  18. Wen, Yi, 1998. "Capacity Utilization under Increasing Returns to Scale," Journal of Economic Theory, Elsevier, vol. 81(1), pages 7-36, July.
  19. Benhabib, J. & Farmer, R.E.A, 1991. "Indeterminacy and Increasing Returns," Papers 165, Cambridge - Risk, Information & Quantity Signals.
  20. Dhami, Sanjit & al-Nowaihi, Ali, 2007. "Why do people pay taxes? Prospect theory versus expected utility theory," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 171-192, September.
  21. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
  22. Bennett, Rosalind L. & Farmer, Roger E. A., 2000. "Indeterminacy with Non-separable Utility," Journal of Economic Theory, Elsevier, vol. 93(1), pages 118-143, July.
  23. Nishimura, Kazuo & Venditti, Alain, 2007. "Indeterminacy in discrete-time infinite-horizon models with non-linear utility and endogenous labor," Journal of Mathematical Economics, Elsevier, vol. 43(3-4), pages 446-476, April.
  24. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics 2001/07, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  25. Patrick-Antoine Pintus, 2009. "Local Determinacy with Non-separable Utility," Working Papers halshs-00409585, HAL.
  26. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, June.
  27. Roger E. A. Farmer, 1999. "Macroeconomics of Self-fulfilling Prophecies, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062038, June.
  28. Patrick Pintus, 2006. "Indeterminacy with almost constant returns to scale: capital-labor substitution matters," Economic Theory, Springer, vol. 28(3), pages 633-649, 08.
  29. Gordon, James P. P., 1989. "Individual morality and reputation costs as deterrents to tax evasion," European Economic Review, Elsevier, vol. 33(4), pages 797-805, April.
  30. Cho, Jang-Ok & Cooley, Thomas F., 1994. "Employment and hours over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 411-432, March.
  31. Juan Carlos Conesa & Carlos Diaz Moreno & Jose Enrique Galdon Sanchez, 1997. "Underground economy and aggregate fluctuations," Working Papers in Economics 17, Universitat de Barcelona. Espai de Recerca en Economia.
  32. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  33. Teresa Lloyd-Braga & Carine Nourry & Alain Venditti, 2006. "Indeterminacy with small externalities: The role of non-separable preferences," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(3-4), pages 217-239.
  34. King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002. "Production, Growth and Business Cycles: Technical Appendix," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
  35. Hintermaier, Thomas, 2003. "On the minimum degree of returns to scale in sunspot models of the business cycle," Journal of Economic Theory, Elsevier, vol. 110(2), pages 400-409, June.
  36. Bajada, Christopher, 1999. "Estimates of the Underground Economy in Australia," The Economic Record, The Economic Society of Australia, vol. 75(231), pages 369-84, December.
  37. Weder, Mark, 2003. "On the plausibility of sunspot equilibria," Research in Economics, Elsevier, vol. 57(1), pages 65-81, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:igi:igierp:289. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.