Corruption, Optimal Taxation, and Growth

Raul Barreto and James Alm ()

Public Finance Review, 2003, vol. 31, issue 3, 207-240

Abstract: How does the presence of corruption affect the optimal mix between consumption and income taxation? In this article, the authors examine this issue using a simple neoclassical growth model, with a self-seeking and corrupt public sector. They find that the optimal tax mix in a corrupt economy is one that relies more heavily on consumption taxes than on income taxes, relative to an economy without corruption. Their model also allows them to investigate the effect of corruption on the optimal (or welfare-maximizing) size of government, and their results indicate that the optimal size of government balances the wishes of the corrupt public sector for a larger government, and so greater opportunities for corruption, with those in the private sector who prefer a smaller government. Not surprisingly, the optimal size of government is smaller in an economy with corruption than in one without corruption.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/1091142103031003001 (text/html)

Related works:
Working Paper: Corruption, Optimal Taxation and Growth (2001)
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:sae:pubfin:v:31:y:2003:i:3:p:207-240

DOI: 10.1177/1091142103031003001

Access Statistics for this article

More articles in Public Finance Review
Bibliographic data for series maintained by SAGE Publications ().