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Tax Evasion and Dynamic Inefficiency

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  • Emin Gahramanov

    (Deakin University)

Abstract

I show within a two-period overlapping generations model with income tax evasion that when the penalty rate set by the government is su¢ ciently small, it is theoretically possible for the capital stock to exceed the golden-rule level on the balanced-growth path. However, such a dynamic inefficiency cannot be guaranteed when the probability of evasion detection is nil.

Suggested Citation

  • Emin Gahramanov, 2009. "Tax Evasion and Dynamic Inefficiency," Economics Bulletin, AccessEcon, vol. 29(1), pages 437-443.
    • Handle: RePEc:ebl:ecbull:eb-08d90011
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I1-P45.pdf
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    References listed on IDEAS

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    6. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
    7. Rangan Gupta, 2005. "Endogenous Tax Evasion and Reserve Requirements: A Comparative Study in the Context of European Economies," Computing in Economics and Finance 2005 328, Society for Computational Economics.
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    2. Chandler McClellan, 2019. "Growth Effects of VAT Evasion and Enforcement," Public Finance Review, , vol. 47(3), pages 530-557, May.

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    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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