Erschienen in:Aarhus University Economics Paper ; No. 2005-04
Umfang:
1 Online-Ressource (29 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.899548
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 7, 2006 erstellt
Beschreibung:
This paper studies equilibrium effects of fiscal policy within a dynamic general equilibrium model where tax evasion and underground activities are explicitly incorporated. There are three main results. (i) The underground sector mitigates the distortionary impact of fiscal policies, while lessening the drop (rise) of aggregate production after restrictive (expansionary) tax shifts. In this respect, tax evasion and the informal economy offer a channel for insuring income and consumption from distortions generated by fiscal policy. (ii) Tax evasion and underground economy can completely reverse the theoretical predictions of the standard neoclassical growth model and rationalize expansionary responses to contractionary fiscal policies. (iii) A dynamic general equilibrium with tax evasion gives a rational justification for a variant of the Laffer curve