Corruption, tax evasion, and seigniorage in a monetary endogenous growth model

Réda Marakbi () and Patrick Villieu
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Réda Marakbi: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we reassess the link between corruption, economic growth, and inflation. To this end, we build an endogenous growth model with transaction costs in which a corruption sector allows households evading from taxation. Several results emerge. First, seigniorage acts as a tax on corruption and therefore allows reducing the aggregate level of corruption in equilibrium. Second, corruption increases both the growth‐maximizing and the welfare‐maximizing seigniorage rate. Third, corruption can be identified as an autonomous channel of nonsuperneutrality of money. Fourth, our model exhibits a U‐shaped relation between corruption and inflation, contrasting with previous literature. On this last point, an empirical investigation based on a structural threshold regression framework confirms the predictions of the theoretical model.

Date: 2020-12
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Citations: View citations in EconPapers (2)

Published in Journal of Public Economic Theory, 2020, 22 (6), pp.2019-2050. ⟨10.1111/jpet.12468⟩

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Related works:
Journal Article: Corruption, tax evasion, and seigniorage in a monetary endogenous growth model (2020)
Working Paper: Corruption, tax evasion, and seigniorage in a monetary endogenous growth model (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03130295

DOI: 10.1111/jpet.12468

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