Human Capital Formation and Tax Evasion

Laszlo Goerke

No 3719, CESifo Working Paper Series from CESifo

Abstract: A strictly risk-averse individual with an exogenous gross income in period one can acquire human capital in the same period and evade taxes. Period-two income rises with educational investments in period one and can also be hidden from tax authorities. It is shown that a greater tax deductibility of educational investments and higher individual ability induce a positive correlation between tax evasion and educational investments in period two, whereas the relationship in period one is ambiguous. These theoretical predictions can explain diverse empirical findings on the correlation between education and tax evasion.

Keywords: human capital; income tax; tax evasion (search for similar items in EconPapers)
JEL-codes: H24 H26 I20 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-acc, nep-hrm, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: HUMAN CAPITAL FORMATION AND TAX EVASION (2013)
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