Tax evasion in a model of endogenous growth

Chen, Been-Lon

doi:10.1016/s1094-2025(03)00002-4

Cited by 81 publications

(105 citation statements)

References 28 publications

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“…Thus, the required condition holds, and the outcome remains qualitatively equivalent for all plausible and legitimate values of the parameters. Chen (2003) provides further empirical support for the plausible values…”

Section: Solving the Model For The Steady State Degree Of Shadow Economymentioning

confidence: 54%

“…Gupta (2008) and Gupta and Ziramba (2009) point out that studies (such as Roubini and Sala-i-Martin (1995), Gupta (2005) and Holman and Neanidis (2006)) which analyse optimal (growth-and/or welfare-maximising) mix of fiscal and monetary policy suffer from the Lucas (1976) critique, by treating tax evasion exogenously. Gupta (2008) and Gupta and Ziramba (2009) reached such conclusions by developing growth models with tax evasion being a behavioural decision (as also pointed out theoretically by Atolia (2003), Chen (2003) and Arana (2004)) to indicate that the level of tax evasion is dependant on the tax and penalty rates. Given this, following a change in the degree of tax evasion, the tax and the penalty rates are not available to the policy maker to respond optimally to such a change, since clearly changes in these policy variables would affect the level of tax evasion further.…”

Section: Les Misérables (1862)mentioning

confidence: 55%

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Tax evasion, financial development and inflation: Theory and empirical evidence

Bittencourt

Gupta

Stander

2014

Journal of Banking & Finance

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Using a standard overlapping generations monetary production economy, faced with endogenously determined tax evasion by heterogeneous agents in the economy, we provide a theoretical model that indicates that both a lower (higher) level of financial development and a higher (lower) level of inflation leads to a bigger (smaller) shadow economy. These findings are empirically tested within a panel econometric framework, using data collected for 150 countries over the period 1980−2009 to enable a broad generalisation of the results. The results support the developed theoretical model, even after having accounted for the differences in the levels of economic development, the level of institutional quality that includes different tax regimes and regulatory frameworks, central bank participation in the economy as well as different macroeconomic policies.JEL Classification: C61, E26, P16 Keywords: Informal economy, financial development, inflation. * We would like to thank two anonymous referees for many helpful comments that tremendously improved the quality of the paper. However, any remaining errors are solely ours.

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Section: Solving the Model For The Steady State Degree Of Shadow Economymentioning

confidence: 54%

Section: Les Misérables (1862)mentioning

confidence: 55%

Tax evasion, financial development and inflation: Theory and empirical evidence

Bittencourt

Gupta

Stander

2014

Journal of Banking & Finance

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“…(4) to (8). Referencing relevant definitions of concealed cost parameters established by Chen (2003) (Note 9), this study revised the expression of concealed cost as (Note 10)…”

Section: Concealed Costs and Underground Economic Incomementioning

confidence: 99%

The Underground Economy and Tax Base Erosion

Wang¹

2013

ASS

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The tax evasion behaviors of above-ground and underground economic activities differ. Above-ground economy tax evasion refers to people engaging in government sanctioned production and consumer activities and circumventing the payment of taxes mandated by law. The underground economy refers to people engaging in economic activities that are not sanctioned by the government, which is also known as the "grey economy." The main objective of engaging in underground economic activity is to avoid taxation by tax agencies. To explore the relationship between taxpayers' underground economic income reporting and tax compliance rates, this study established a utility function that included both the above-ground and underground economies, and divided public goods based on their above-ground and underground economic weight. This study analyzed taxpayers' underground economic income by adopting the probability of penalization and identifying the optimal participation rate. This study also found that taxpayers' corresponding risk aversion attitudes after becoming wealthy, or experiencing increased income, was a key factor of whether increases in the tax rate generated increases in the ratio of the underground economy labor force.

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“…Many studies have analyzed the effects of taxation and tax structure or more particularly of tax policy on the growth (King and Rebelo, 1990;Martin and Fardmanesh, 1990;Barro and Salt-IMartin, 1992;Easterly and Rebelo, 1993;Barro, 1997Barro, , 1998Chen, 2003;Lee and Gordon, 2005).…”

Section: Introductionmentioning

confidence: 99%

Corruption, Taxation and Economic Growth: Theory and Evidence

Attila

2008

SSRN Journal

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Tax evasion in a model of endogenous growth

Cited by 81 publications

References 28 publications

Tax evasion, financial development and inflation: Theory and empirical evidence

Tax evasion, financial development and inflation: Theory and empirical evidence

The Underground Economy and Tax Base Erosion

Corruption, Taxation and Economic Growth: Theory and Evidence

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