Tax Evasion, Balanced-Budget Rule, and indeterminacy.

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Title:	Tax Evasion, Balanced-Budget Rule, and indeterminacy.
Authors:	Wang, Wei Neng;Chang, Juin Jen;Shieh, Jhy Yuan;Chen, Jhy Hwa
Contributors:	淡江大學經濟學系
Keywords:	Indeterminacy;tax evasion;balanced-budget rule
Date:	2012-12-15
Issue Date:	2013-01-18 02:56:41 (UTC+8)
Abstract:	This paper incorporates tax evasion into a one-sector real business cycle model, and income taxation is endogenously determined in order to balance the government budget (such as Schmitt-Grohè and Uribe, 1997). We find that an economy with tax evasion can make the macroeconomy become more stable, and a higher fraction of labor income tax evasion has a stronger stabilizing effect. Moreover, a government that has tax evasion prevention policies could reduce the fraction of tax evasion, but equilibrium indeterminacy is more likely to occur. Accordingly, the government’s policy to cut down on labor income tax evasion has a destabilizing effect.
Relation:	台灣經濟學會2012年會暨第13屆全國實證經濟學研討會論文集
Appears in Collections:	[Graduate Institute & Department of Economics] Proceeding

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