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Tax Evasion and Financial Repression

  • Rangan Gupta

    (University of Pretoria)

Using a simple overlapping generations framework, calibrated to four Southern European countries, we analyze the relationship between tax evasion, determined endogenously, and financial repression. We show that higher degree of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of financial restriction.

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File URL: http://web2.uconn.edu/economics/working/2005-34.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-34.

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Length: 39 pages
Date of creation: Jul 2005
Date of revision: Jun 2007
Handle: RePEc:uct:uconnp:2005-34
Note: This paper previously circulated under the title "Policy Response of Endogenous Tax Evasion"
Contact details of provider: Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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  1. Correia, Isabel & Neves, Joao C & Rebelo, Sérgio, 1994. "Business Cycles in a Small Open Economy," CEPR Discussion Papers 996, C.E.P.R. Discussion Papers.
  2. Joseph H. Haslag & Eric R. Young, 1998. "Revenue-maximizing monetary policy," Working Papers 9801, Federal Reserve Bank of Dallas.
  3. Rangan Gupta, 2005. "Costly State Monitoring and Reserve Requirements," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 263-288, November.
  4. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
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  8. Been-Lon Chen & Yeong-Yuh Chiang & Ping Wang, 2000. "Credit Market Imperfections, Financial Activity and Economic Growth," Vanderbilt University Department of Economics Working Papers 0020, Vanderbilt University Department of Economics.
  9. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  10. Bhattacharya, Joydeep & Haslag, Joseph, 2001. "On the Use of the Inflation Tax when Non-Distortionary Taxes Are Available," Staff General Research Papers 5247, Iowa State University, Department of Economics.
  11. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
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  13. Roubini, Nouriel & Sala-i-Martin, Xavier, 1995. "A growth model of inflation, tax evasion, and financial repression," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 275-301, April.
  14. Giovannini, Alberto & de Melo, Martha, 1993. "Government Revenue from Financial Repression," American Economic Review, American Economic Association, vol. 83(4), pages 953-63, September.
  15. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
  16. Haslag, Joseph H. & Hein, Scott E., 1995. "Does it matter how monetary policy is implemented?," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 359-386, April.
  17. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
  18. Haslag, Joseph H, 1998. "Monetary Policy, Banking, and Growth," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 489-500, July.
  19. Rangan Gupta, 2005. "Asymmetric Information, Tax Evasion and Alternative Instruments of Government Revenue," Working papers 2005-33, University of Connecticut, Department of Economics.
  20. Diamond, Peter & Yellin, Joel, 1990. "Inventories and Money Holdings in a Search Economy," Econometrica, Econometric Society, vol. 58(4), pages 929-50, July.
  21. Been-Lon Chen, 2003. "Tax Evasion in a Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 381-403, April.
  22. Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal.
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