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Can tax evasion tame Leviathan governments?

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  • Manfred Gärtner
  • Frode Brevik

Abstract

This paper looks at how income tax rates, consumption and public spending respond as venues for tax evasion open or close. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonous as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.

Suggested Citation

  • Manfred Gärtner & Frode Brevik, 2006. "Can tax evasion tame Leviathan governments?," University of St. Gallen Department of Economics working paper series 2006 2006-19, Department of Economics, University of St. Gallen.
    • Handle: RePEc:usg:dp2006:2006-19
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    References listed on IDEAS

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    Cited by:

    1. Borner, Silvio, 2010. "Die Finanzkrise von 2008/09 im Lichte der Konjunkturschwankungen von Walter Adolf Jöhr von 1952," Walter Adolf Jöhr Lecture 2010, University of St. Gallen, School of Economics and Political Science, Institute of Economics (FGN-HSG).
    2. Wyplosz, Charles, 2009. "Macroeconomics After the Crisis," Walter Adolf Jöhr Lecture 2009, University of St. Gallen, School of Economics and Political Science, Institute of Economics (FGN-HSG).
    3. Célimène, Fred & Dufrénot, Gilles & Mophou, Gisèle & N'Guérékata, Gaston, 2016. "Tax evasion, tax corruption and stochastic growth," Economic Modelling, Elsevier, vol. 52(PA), pages 251-258.

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    More about this item

    Keywords

    Leviathan government; income tax; tax evasion; public spending; rent seeking;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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