Dynamic Tax Evasion and Growth With Heterogeneous Agents

Francesco Menoncin () and Andrea Modena ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We develop a tractable model of a production economy in which public capital improves aggregate productivity and the taxpayers have heterogeneous evasion opportunities. We show that, by issuing bonds, compliant taxpayers supply the evaders with an instrument to hedge against auditing risks, thereby expanding their evasion capacity. Moreover, we demonstrate that a higher share of tax evaders reduces the economy’s total factor productivity but has a hump-shaped relationship with the growth rate of aggregate capital.

Keywords: Dynamic tax evasion; general equilibrium; growth; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E20 G11 H26 (search for similar items in EconPapers)
Pages: 12
Date: 2023-02
New Economics Papers: this item is included in nep-acc, nep-dge, nep-fdg, nep-gro, nep-iue, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2023_393

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