Equilibrium implications of fiscal policy with tax evasion: A long run perspective

Francesco Busato (), Bruno Chiarini and Guido M. Rey

International Review of Law and Economics, 2012, vol. 32, issue 2, 197-214

Abstract: This paper studies equilibrium effects of fiscal policy within a dynamic general equilibrium model where tax evasion and underground activities are explicitly incorporated. In particular, the paper analytically measures (both from a theoretical and empirical viewpoint) of how much the underground sector mitigates the distortionary impact of fiscal policies, while lessening the drop (rise) of aggregate production after contractionary (expansionary) tax shifts.

Keywords: Two-sector dynamic general equilibrium models; Fiscal policy; Tax evasion and underground activities (search for similar items in EconPapers)
JEL-codes: E13 E26 E32 H20 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:32:y:2012:i:2:p:197-214

DOI: 10.1016/j.irle.2011.10.004

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