EconPapers    
Economics at your fingertips  
 

The Aggregate Consequences of Tax Evasion

Alessandro Di Nola (), Georgi Kocharkov (), Almuth Scholl () and Anna-Mariia Tkhir
Additional contact information
Anna-Mariia Tkhir: Goethe University Frankfurt

Review of Economic Dynamics, 2021, vol. 40, 198-227

Abstract: This paper studies how tax evasion in the self-employment sector affects aggregate outcomes and welfare. We develop a dynamic general equilibrium model with incomplete markets in which heterogeneous agents choose between being a worker or self-employed. Self-employed agents may misreport their business income but face the risk of being detected by the tax authorities. Our model replicates important quantitative features of the U.S. economy in terms of income, wealth, self-employment, and misreporting. Tax evasion alleviates credit constraints and leads to a larger self-employment sector but reduces the average size and productivity of self-employed businesses. Tax evasion generates positive welfare effects for the self-employed at the expense of the workers. (Copyright: Elsevier)

Keywords: Tax evasion; Self-employment; Occupational choice; Wealth inequality; Incomplete markets; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E21 E62 H26 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2020.09.009
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "The Aggregate Consequences of Tax Evasion" (2020) Downloads
Working Paper: The Aggregate Consequences of Tax Evasion (2018) Downloads
Working Paper: The Aggregate Consequences of Tax Evasion (2018) Downloads
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:issued:19-36

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2020.09.009

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2022-01-17
Handle: RePEc:red:issued:19-36