Premium
Tax evasion, social norms, and economic growth
Author(s) -
Bethencourt Carlos,
Kunze Lars
Publication year - 2019
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12346
Subject(s) - economics , tax evasion , per capita , interdependence , gross domestic product , overlapping generations model , evasion (ethics) , microeconomics , monetary economics , public economics , macroeconomics , population , demography , immune system , immunology , sociology , biology , political science , law
We propose a theoretical model to account for the negative relationship between tax evasion and economic development. More precisely, we integrate tax morale into a dynamic OLG model of tax evasion. Tax morale is modeled as a social norm for tax compliance. We show that accounting for such nonpecuniary costs of evasion may explain (a) why the share of evaded taxes over GDP decreases when countries grow and (b) that tax morale is positively correlated with the level of GDP per capita. Finally, a higher tax rate increases aggregate evasion and the number of evaders when taxpayers decisions are interdependent.