 Corruption, Optimal Taxation and GrowthRaul Barreto and James Alm () No 2001-03, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy Abstract: How does the presence of corruption affect the optimal mix between consumption and income taxation? In this paper we examine this issue using a simple neoclassical growth model, with a self-seeking and corrupt public sector. We find that the optimal tax mix in a corrupt economy is one that relies more heavily upon consumption taxes than on income taxes, relative to an economy without corruption. Our model also allows us to investigate the effect of corruption on the optimal size of government, and our 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. Keywords: endogenous growth; corruption; taxation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2001-03 Access Statistics for this paper More papers in School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy Contact information at EDIRC. |
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