Fraud Deterrence in Dynamic Mirrleesian Economies

Thomas Mertens and Roc Armenter ()
Additional contact information
Thomas Mertens: NYU Stern

No 468, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: Social and private insurance schemes rely on legal action to deter fraud and tax evasion. This observation guides us to introduce a random state-verification technology in a dynamic economy with private information. With some probability, an agent's skill level becomes known to the planner who prescribes a punishment if the agent is caught misreporting. We show how deferring consumption can ease the provision of incentives. As a result, the marginal benefit may be below the marginal cost of investment in the constrained efficient allocation suggesting a subsidy on capital. We characterize conditions such that the intertemporal wedge is negative in finite horizon economies. In an infinite-horizon economy, we find that the constrained efficient allocation converges to a high level of consumption, full insurance, and no labor distortions for any probablity of state-verification.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2010/paper_468.pdf (application/pdf)

Related works:
Journal Article: Fraud deterrence in dynamic Mirrleesian economies (2013)
Working Paper: Fraud deterrence in dynamic Mirrleesian economies (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:468

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().