Can tax evasion tame Leviathan governments?

Manfred Gärtner () and Frode Brevik ()

University of St. Gallen Department of Economics working paper series 2006 from Department of Economics, University of St. Gallen

Abstract: This paper looks at how income tax rates, consumption and public spending respond as venues for tax evasion open or close. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonous as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.

Keywords: Leviathan government; income tax; tax evasion; public spending; rent seeking (search for similar items in EconPapers)
JEL-codes: E2 E62 F42 H2 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-07
New Economics Papers: this item is included in nep-mac and nep-pbe
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Journal Article: Can tax evasion tame Leviathan governments? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2006:2006-19

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