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Cultural norms, the persistence of tax evasion, and economic growth

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journal contribution
posted on 2016-05-13, 11:28 authored by Dimitrios Varvarigos
I study the effects of tax evasion on economic growth by focusing on the cultural aspects of tax compliance and their effect on the extensive margin of tax evasion. A cultural norm that determines the contemptibility of tax dodging practices links the past incidence of tax evasion with the tax payers’ current incentives to conceal sources of income. This dynamic complementarity may lead to multiple equilibria in the evolution of tax evasion. Due to the latter’s effect on capital accumulation, this multiplicity may lead economies in divergent development paths, as long as they differ in the initial magnitude of tax evasion. This happens even though economies may be, on the outset, identical in terms of capital stock and structural characteristics, including those that govern tax enforcement.

History

Citation

Economic Theory, 2016

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/Department of Economics

Version

  • AM (Accepted Manuscript)

Published in

Economic Theory

Publisher

Springer Verlag

issn

1432-0479;0938-2259

Acceptance date

2016-04-29

Copyright date

2016

Available date

2017-05-21

Publisher version

http://link.springer.com/article/10.1007/s00199-016-0976-1?view=classic

Notes

The file associated with this record is under an 12-month embargo from the date of publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.

Language

en

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