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Tax Avoidance, Welfare Transfers, and Asset Prices

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  • Denis Gorea

    (Goethe University Frankfurt)

Abstract

Does tax avoidance have any implications for financial markets? This paper quantifies the general equilibrium implications of tax avoidance by setting up an incomplete markets production economy model in which households pay capital gains taxes and have access to tax avoidance technologies provided by financial institutions. I find that changes in the level of tax avoidance have disproportionate effects on different groups of agents and generally benefit the old, wealthy and high income households and detrimental for young, poor and low income households. Furthermore, these changes have asset pricing implications primarily due to the distortion in the optimal portfolio allocation generated by capital gains taxation.

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  • Denis Gorea, 2013. "Tax Avoidance, Welfare Transfers, and Asset Prices," 2013 Meeting Papers 1054, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1054
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    References listed on IDEAS

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