Endogenous Corruption and Tax Evasion in a Dynamic Model

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy

Abstract: When the government provides public services necessary to production tax evasion results in some degree of income redistribution which may imply an higher or a lower level of aggregate income in the longrun. The outcome mainly depends on the burden of …scal pressure. If the tax administration is harmed by corruptibility of some agents then the performance of the economy is also a¤ected by the di¤usion of corruption, its impact depending upon the cost of detecting a bribe agreement. When such cost varies with the stage of development, as it happens if the latter determines the level of transparency, then poverty traps may emerge and the steady state level of income will depend on the initial condition. Some implications of the model are in line with recent empirical evidence.

Keywords: Tax evasion; corruption; public spending; poverty traps (search for similar items in EconPapers)
JEL-codes: D73 H26 H41 K42 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law, nep-pbe and nep-reg
Date: Written 2006-01-01
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