IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-08e60012.html
   My bibliography  Save this article

The relationship between tax evasion and tax revenue in Chang, Lai and Chang (1999)

Author

Listed:
  • Martin Besfamille

    (Universidad Torcuato Di Tella)

Abstract

Chang, Lai and Chang (1999) use a micro-founded short-term macroeconomic model, with an imperfectly competitive market, to analyze, among other issues, the relationship between tax evasion and tax revenue. They show that this relationship depends upon the market structure. In particular, when the market becomes perfectly competitive, this relationship can be non monotonic. Although CLC give an intuition of this result, based on the interaction of two opposite effects, they do not make explicit the form of this relationship. The goal of this note is precisely to show that, within the Chang, Lai and Chang (1999) model, one can completely characterize the shape of the relationship between tax evasion and tax revenue under perfect competition. Under some parametric conditions, the tax revenue decreases with tax evasion otherwise, their relationship takes the form of a `Laffer curve'.

Suggested Citation

  • Martin Besfamille, 2008. "The relationship between tax evasion and tax revenue in Chang, Lai and Chang (1999)," Economics Bulletin, AccessEcon, vol. 5(15), pages 1-6.
    • Handle: RePEc:ebl:ecbull:eb-08e60012
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/EB/2008/Volume5/EB-08E60012A.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peacock, Alan & Shaw, G K, 1982. "Tax Evasion and Tax Revenue Loss," Public Finance = Finances publiques, , vol. 37(2), pages 269-278.
    2. Dixon, Huw, 1987. "A Simple Model of Imperfect Competition with Walrasian Features," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 134-160, March.
    3. von Zameck, Walburga, 1989. "Tax Evasion and Tax Revenue Loss: Another Elaboration of the Peacock-Shaw Approach," Public Finance = Finances publiques, , vol. 44(2), pages 308-315.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Damiani Genaro Martín, 2024. "Indirect tax evasion, shadow economy, and the Laffer curve: A theoretical approach," Asociación Argentina de Economía Política: Working Papers 4724, Asociación Argentina de Economía Política.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen-Ya Chang & Ching-Chong Lai & Juin-Jen Chang, 1999. "Imperfect Competition and Tax Evasion," Public Finance Review, , vol. 27(3), pages 371-381, May.
    2. repec:ebl:ecbull:v:5:y:2008:i:15:p:1-6 is not listed on IDEAS
    3. Maurizio Bovi & Roy Cerqueti, 2014. "A quantitative view on policymakers’ goal, institutions and tax evasion," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1493-1510, May.
    4. Wen-Ya Chang & Ching-Chong Lai, 1996. "The Implication of Efficiency Wages On Tax Evasion and Tax Collections," Public Finance Review, , vol. 24(2), pages 163-172, April.
    5. Torben M. Andersen, 2003. "Wage formation and European integration," European Economy - Economic Papers 2008 - 2015 188, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Hsieh Hui-ting & Lai Ching-chong & Chen Kuan-jen, 2015. "A Macroeconomic Model of Imperfect Competition with Patent Licensing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1579-1618, October.
    7. Lockwood, Ben, 2003. "Imperfect competition, the marginal cost of public funds and public goods supply," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1719-1746, August.
    8. Andersen, Torben M., "undated". "The Macroeconomic Policy Mix in a Monetary Union with Flexible Inflation Targeting," Economics Working Papers 2003-2, Department of Economics and Business Economics, Aarhus University.
    9. Hassan Molana & Junxi Zhang, 2001. "Market Structure and Fiscal Policy Effectiveness," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 147-164, March.
    10. Chang, Cheng-wei & Lai, Ching-chong, 2012. "Markups and the number of firms in a simple model of imperfect competition," Economics Letters, Elsevier, vol. 116(3), pages 277-280.
    11. Torben Andersen, 2005. "Is there a Role for an Active Fiscal Stabilization Policy?," CESifo Working Paper Series 1447, CESifo.
    12. Damiani, Genaro Martín, 2024. "Indirect tax evasion, shadow economy, and the Laffer curve: A theoretical approach," MPRA Paper 121779, University Library of Munich, Germany.
    13. Andersen, Torben M. & Spange, Morten, 2006. "International interdependencies in fiscal stabilization policies," European Economic Review, Elsevier, vol. 50(5), pages 1169-1195, July.
    14. Andersen, Torben M, 2002. "Fiscal Stabilization Policy in a Monetary Union with Inflation Targeting," CEPR Discussion Papers 3232, C.E.P.R. Discussion Papers.
    15. Brito, Paulo & Dixon, Huw, 2013. "Fiscal policy, entry and capital accumulation: Hump-shaped responses," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2123-2155.
    16. Holden,S., 1999. "Wage setting under different monetary regimes," Memorandum 12/1999, Oslo University, Department of Economics.
    17. Marco Di Domizio, 2006. "Effect of Social Contribution Evasion on Working Time Allocation: Theoretical Contribution in a Two sector Model," Discussion Papers 16_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    18. Werner W. Pommerehne, 1983. "Steuerhinterziehung und Schwarzarbeit als Grenzen der Staatstätigkeit," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 119(III), pages 261-284, September.
    19. Luís F. Costa & Huw Dixon, 2009. "Fiscal Policy under Imperfect Competition: A Survey," Working Papers Department of Economics 2009/25, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    20. Margarita Katsimi & Vassilis Sarantides, 2012. "The Impact Of Fiscal Policy On Profits," Economic Inquiry, Western Economic Association International, vol. 50(4), pages 1050-1068, October.
    21. Cheng-wei Chang & Ching-chong Lai, 2021. "Optimal fiscal policies and market structures with monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1385-1411, December.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-08e60012. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.