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Human Capital Formation and Tax Evasion

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  • Laszlo Goerke

Abstract

A strictly risk-averse individual with an exogenous gross income in period one can acquire human capital in the same period and evade taxes. Period-two income rises with educational investments in period one and can also be hidden from tax authorities. It is shown that a greater tax deductibility of educational investments and higher individual ability induce a positive correlation between tax evasion and educational investments in period two, whereas the relationship in period one is ambiguous. These theoretical predictions can explain diverse empirical findings on the correlation between education and tax evasion.

Suggested Citation

  • Laszlo Goerke, 2012. "Human Capital Formation and Tax Evasion," CESifo Working Paper Series 3719, CESifo.
    • Handle: RePEc:ces:ceswps:_3719
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    References listed on IDEAS

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    Cited by:

    1. Pickhardt, Michael & Prinz, Aloys, 2014. "Behavioral dynamics of tax evasion – A survey," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 1-19.

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    More about this item

    Keywords

    human capital; income tax; tax evasion;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • I20 - Health, Education, and Welfare - - Education - - - General

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