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Why People Tolerate Underground Economy and Tax Evasion?

Listed author(s):
  • Soldatos, Gerasimos T.

An answer to this question is provided on the basis of a game-theoretic analysis connected methodologically with an intertemporal maximization model since a game played repeatedly over time, brings forward for consideration the present value of a sequence of payoffs. An optimal control problem arises for each individual, a problem that has to take into account the uncertainty stemming from the playing of mixed strategies. The result is that all of us cheat at least a little bit the state, and that we may not be sure that the state does not want us to do so: underground economy and/or tax evasion may be a necessary evil whenever they stabilize the economy and whenever they aid economic development.

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File URL: https://mpra.ub.uni-muenchen.de/58545/1/MPRA_paper_58545.pdf
File Function: original version
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 58545.

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Date of creation: 1995
Handle: RePEc:pra:mprapa:58545
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Web page: https://mpra.ub.uni-muenchen.de

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  1. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, December.
  2. Anand, Paul, 1995. "Foundations of Rational Choice Under Risk," OUP Catalogue, Oxford University Press, number 9780198774426.
  3. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-254, March.
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