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HUMAN CAPITAL FORMATION AND TAX EVASION
Author(s) -
Goerke Laszlo
Publication year - 2013
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2012.00436.x
Subject(s) - economics , tax evasion , evasion (ethics) , period (music) , human capital , double taxation , positive correlation , income tax , labour economics , monetary economics , demographic economics , public economics , market economy , biology , medicine , physics , immune system , acoustics , immunology
A strictly risk‐averse individual with an exogenous gross income in period one can acquire human capital in the same period and evade taxes. Period‐two income rises with educational investments in period one and can also be hidden from tax authorities. It is shown that a greater tax deductibility of educational investments and higher individual ability induce a positive correlation between tax evasion and educational investments in period two, whereas the relationship in period one is ambiguous. These theoretical predictions can explain diverse empirical findings on the correlation between education and tax evasion.