Tax evasion, tax corruption and stochastic growth
This paper presents a continuous time stochastic growth model to study the e¤ects of tax evasion and tax corruption on the level and volatil- ity of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, de- pending upon the consumers degree of risk aversion, the tax income yield, the risk-adjusted return of the agents portfolio, the productivity of public spending. We nd that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parame- ters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illus- tration of the model.
|Date of creation:||01 Feb 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 734 763-5020
Fax: 734 763-5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
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.:
- Stephen Turnovsky, 1998.
"On the Role of Government in a Stochastically Growing Open Economy,"
0073, University of Washington, Department of Economics.
- Turnovsky, Stephen J., 1999. "On the role of government in a stochastically growing open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 873-908, April.
- Stephen Turnovsky, 1998. "On the Role of Government in a Stochastically Growing Open Economy," Discussion Papers in Economics at the University of Washington 0073, Department of Economics at the University of Washington.
- Cerqueti, Roy & Coppier, Raffaella, 2011.
"Economic growth, corruption and tax evasion,"
Elsevier, vol. 28(1), pages 489-500.
- Turnovsky, S.J., 1991.
"The Impact of terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis,"
91-19, University of Washington, Department of Economics.
- Turnovsky, Stephen J., 1993. "The impact of terms of trade shocks on a small open economy: A stochastic analysis," Journal of International Money and Finance, Elsevier, vol. 12(3), pages 278-297, June.
- Turnovsky, S.J., 1991. "The Impact of terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis," Discussion Papers in Economics at the University of Washington 91-19, Department of Economics at the University of Washington.
- Stephen J. Turnovsky, 1991. "The Impact of Terms of Trade Shocks on a Small Open Economy: A Stochastic Analysis," NBER Working Papers 3916, National Bureau of Economic Research, Inc.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Lin, Wen-Zhung & Yang, C. C., 2001. "A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 25(11), pages 1827-1840, November.
- Ira N. Gang & Amal Sanyal & Omkar Goswami, 1998.
"Corruption, Tax Evasion and the Laffer Curve,"
Departmental Working Papers
199604, Rutgers University, Department of Economics.
- Hindriks, J. & Keen, M. & Muthoo, A., 1996.
"Corruption, Extortion and Evasion,"
179, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- Hindriks, J. & Keen, M. & Muthoo, A., 1998. "Corruption, Extortion and Evasion," Discussion Papers 9809, Exeter University, Department of Economics.
- Jean Hindriks, Michael Keen and Abhinay Muthoo, . "Corruption, Extortion and Evasion," Economics Discussion Papers 470, University of Essex, Department of Economics.
- 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.
- Ratbek Dzhumashev, 2007. "Corruption, Uncertainty And Growth," Monash Economics Working Papers 15-07, Monash University, Department of Economics.
- Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
- Paolo Mauro, 2002.
"The Persistence of Corruption and Slow Economic Growth,"
IMF Working Papers
02/213, International Monetary Fund.
- Paolo Mauro, 2004. "The Persistence of Corruption and Slow Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2013-1043. 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: (Laurie Gendron)
If references are entirely missing, you can add them using this form.