Busato, Francesco
[Verfasser:in]
;
Chiarini, Bruno
[Sonstige Person, Familie und Körperschaft];
De Angelis, Pasquale
[Sonstige Person, Familie und Körperschaft];
Marzano, Elisabetta
[Sonstige Person, Familie und Körperschaft]
Erschienen in:Aarhus University Economics Paper ; No. 2005-10
Umfang:
1 Online-Ressource (27 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.1147606
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 10, 2005 erstellt
Beschreibung:
In this paper we investigate the effects of different fiscal policies on the firm choice to produce underground. We consider a tax evading firm operating simultaneously both in the regular and in the underground economy. We suggest that such a kind of firm, referred to as moonlighting firm, is able to offset the specific costs usually stressed by literature on underground production, such as those suggested by Loayza (1994) and Anderberg et al. (2003). Investigating the effects of different fiscal policy interventions, we find that taxation is a critical parameter to define the size of capital allocation in the underground production. In fact, a strong and inverse relationship is found, and tax reduction is the best policy to reduce the convenience to produce underground. We also confirm the depressing effect on investment of taxation (see, for instance, Summers, 1981), so that tax reduction has no cost in terms of investment. By contrast, the model states that while enforcement is an effective tool to reduce capital allocation in the underground production, it also reduce the total capital stock. Moreover, we also suggest that the allowance of incentives to capital accumulation may generate, in this specific typology of firm, some unexpected effects, causing, together with a positive investment process, also an increase in the share of irregularity. This finding could explain, in a microeconomic framework, the evidence of Italian southern regions, where high incentivesare combined with high irregularity ratios