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Public Goods, Hidden Income, and Tax Evasion: Some Nonstandard Results from the Warm-Glow Model

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  • Daniel M. Hungerman

Abstract

A large literature explores crowd out in situations where public goods are jointly provided; work in this area typically depicts a tax system where individuals take taxes as given. But in some settings, such as those in developing economies, efforts to evade or avoid taxes may be widespread. Using the canonical warm-glow model, this paper considers joint pubic-good provision in a setting where individuals can evade taxes by hiding their income. The model's implications change significantly in this setting: with hidden income, stronger warm glow will lead to greater crowd out, not less. Using research on crowd out and inter-family transfers, I present suggestive evidence that the model's results may help to reconcile divergent estimates of crowd out in the literature.

Suggested Citation

  • Daniel M. Hungerman, 2014. "Public Goods, Hidden Income, and Tax Evasion: Some Nonstandard Results from the Warm-Glow Model," NBER Working Papers 19804, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19804
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    Cited by:

    1. Marcelo Arbex & Enlinson Mattos, 2020. "Tax Preferences and Optimal Income Taxation," Working Papers 2006, University of Windsor, Department of Economics.
    2. Daniel Hungerman, 2023. "Tax evasion, efficiency, and bunching in the presence of enforcement notches," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 43-68, February.
    3. Roman M. Sheremeta & Neslihan Uler, 2021. "The impact of taxes and wasteful government spending on giving," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 355-386, June.
    4. Joel Slemrod & Yulia Kuchumova, 2023. "Gifts to government," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 453-492, April.

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    More about this item

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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