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Tax evasion and growth

Matthias Wrede ()

Finnish Economic Papers, 1995, vol. 8, issue 2, 82-90

Abstract: In an overlapping generations model, in which savings and tax evasion are endogenous, tax evasion will have a negative effect on long-term growth if public services are productive inputs for private producers. It is shown in the paper that tax evasion reduces the endogenous growth rate. Moreover; the case of pure public consumption is considered. Growth is then exogenous at the steady state path. It is found out that the effect ofa tax-enforcement parameter change on the longrun equilibrium heavily depends on the intertemporal elasticity of substitution.

JEL-codes: H26 O41 (search for similar items in EconPapers)
Date: 1995
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Handle: RePEc:fep:journl:v:8:y:1995:i:2:p:82-90