Tax Evasion and Dynamic Inefficiency

Emin Gahramanov

Economics Bulletin, 2009, vol. 29, issue 1, 437-443

Abstract: I show within a two-period overlapping generations model with income tax evasion that when the penalty rate set by the government is su¢ ciently small, it is theoretically possible for the capital stock to exceed the golden-rule level on the balanced-growth path. However, such a dynamic inefficiency cannot be guaranteed when the probability of evasion detection is nil.

JEL-codes: D9 H2 (search for similar items in EconPapers)
Date: 2009-03-25
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Citations: View citations in EconPapers (3)

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