Public Good Provision
Chowdhury Mohammad S Anwar,
Alexander Matros and
Sonali Sen Gupta
No 300159332, Working Papers from Lancaster University Management School, Economics Department
We develop a model that links tax evasion, corruption, and public good provision. In our model, citizens pay or evade taxes into the public fund, which a corrupt governor redistributes. Each citizen forms expectations about the amount of public goods the governor should provide. After observing the actual level of public goods, a citizen punishes the governor if this level is below his expectations. We describe three types of equilibria: tax evasion, efficient public good provision, and symmetric mixed-strategy. We show that the highest expectations can lead to no free riding (tax evasion) and the efficient level of public good provision even with the corrupt governor and without punishment for tax evasion.
Keywords: Tax evasion; Audits; Embezzlement; Corruption; Sanctions; Public goods (search for similar items in EconPapers)
JEL-codes: D73 D83 H40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-iue, nep-mic, nep-pbe and nep-pub
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