Tax evasion, tax corruption and stochastic growth

Fred Célimène (fred.celimene@martinique.univ-ag.fr), Gilles Dufrénot (gilles.dufrenot@sciencespo-aix.fr), Gisèle Mophou (gmophou@univ-ag.fr) and Gaston N’Guérékata

No wp1043, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper presents a continuous time stochastic growth model to study the e¤ects of tax evasion and tax corruption on the level and volatil- ity of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, de- pending upon the consumers degree of risk aversion, the tax income yield, the risk-adjusted return of the agents portfolio, the productivity of public spending. We nd that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parame- ters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illus- tration of the model.

Keywords: Stochastic growth; tax evasion; tax corruption (search for similar items in EconPapers)
JEL-codes: D91 H26 O41 (search for similar items in EconPapers)
Pages: pages
Date: 2013-02-01
New Economics Papers: this item is included in nep-iue, nep-ore, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Tax evasion, tax corruption and stochastic growth (2016)
Working Paper: Tax evasion, tax corruption and stochastic growth (2016)
Working Paper: Tax evasion,tax corruption and stochastic growth (2013)
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