The Culture of Corruption, Tax Evasion, and Economic Growth

Abstract

This study uses a dynamic general equilibrium model to quantify the effects of corruption and tax evasion on fiscal policy and economic growth. The model is calibrated to match estimates of tax evasion in developing countries. The calibrated model is able to generate reasonable predictions for net tax rates, the corruption associated with public investment projects, and the negative correlation between corruption and tax revenue. The presence of corruption and evasion is shown to have significant, but not large, negative effects on economic growth. The relatively moderate effects help explain the absence of a robust negative correlation between growth and corruption in cross-country data. The model also implies that cracking down on tax evasion before addressing corruption can be a bad idea and that higher wages for public officials can improve welfare.

Corruption, Shadow Economy and Economic Growth: An Empirical Survey Across the European Union Countries

“…In the same view, Treisman (2000) and Paldam (2001Paldam ( , 2002Paldam ( , 2009) argued that corruption is a poverty driven disease, which vanishes as the country becomes richer. A lot of evidences have suggested that corruption has a negative effect on economic development, being an impediment to increasing investment (Mauro, 1995;Paldam, 2009), absorption of European funds (Achim and Borlea, 2015), efficiency in fiscal policy (Fjeldstad, 1996(Fjeldstad, , 2003Kaufman, 2010;Ivanyna et al, 2010) and finally on economic growth. For instance, Kaufman (2010) found a strong relationship between corruption and fiscal deficits in industrialized countries.…”

“…Further, he also found that corruption lowers tax revenues, increases public expenditures, affects productivity, competitiveness and growth. In the same view, Ivanyna et al (2010) pointed out that increasing corruption results to a decrease in government revenues and hampers economic growth. Further, by investigating the findings of Schneider and Klingmair (2004), the highest rates of shadow activities were found to be associated with developing and in transition countries.…”

Corruption as an Occupational Choice: Endogenous Corruption and Tax Policy

“…Myles and Yousefi (2015) show that excessive inflation may be a negative side effect of corruption if the government compensates for lost revenue by exploiting seigniorage and increasing the rate of monetary expansion. Ivanyna, Mourmouras, and Rangazas (2016) study the impact on growth of corrupt public officials appropriating funds intended for public investment and demonstrated that this lead to excessively high tax rates.…”

Health Management Information System (HMIS); Whose Data is it Anyway? Contextual Challenges

“…Despite the implementation of result based management initiatives and tools like the HMIS in Uganda, demand for accountability mostly focuses on monitoring information related to budget preparation, execution and reporting. There is still a culture of "consuming budgets" versus reaching results and performance is mostly measured in terms of activities and outputs rather than outcomes [4,35,36]. Planning and setting programs targets may not necessarily be based on evidence or reliable data; many at the MOH will tell you that the problem is not lack or absence of data but rather use of the available data/information.…”