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Tax evasion,tax corruption and stochastic growth

Fred Celimene (), Gilles Dufrénot (), Gisele Mophou () and Gaston N'Guerekata
Additional contact information
Fred Celimene: CEREGMIA, Université des Antilles et de la Guyane
Gisele Mophou: CEREGMIA, Université des Antilles et de la Guyane
Gaston N'Guerekata: Morgan State University, Baltimore, MD, USA

No 2013-05, Documents de Travail from CEREGMIA, Université des Antilles et de la Guyane

Abstract: This paper presents a continuous time stochastic growth model to study the effects of tax evasion and tax corruption on the level and volatility of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, depending upon the consumer's degree of risk aversion, the tax income yield, the risk-adjusted return of the agent's portfolio, the productivity of public spending. We find that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parameters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illustration of the model.

Pages: 38 pages
Date: 2013-02
New Economics Papers: this item is included in nep-fdg, nep-iue, nep-pbe and nep-pub
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http://www2.univ-ag.fr/RePEc/DT/DT2013-05_Celimene_al.pdf First version, 2013 (application/pdf)
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Related works:
Journal Article: Tax evasion, tax corruption and stochastic growth (2016) Downloads
Working Paper: Tax evasion, tax corruption and stochastic growth (2016)
Working Paper: Tax evasion, tax corruption and stochastic growth (2013) Downloads
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