Corruption, Tax Evasion and Social Values

Reference : Corruption, Tax Evasion and Social Values


	Document type :	E-prints/Working papers : First made available on ORBilu
	Discipline(s) :	Business & economic sciences : Macroeconomics & monetary economics
	To cite this reference:	http://hdl.handle.net/10993/17519

Title :	Corruption, Tax Evasion and Social Values
Language :	English
Author, co-author :	Litina, Anastasia [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
	Palivos, Theodore [Athens University of Economics and BusinessCorruption, Tax Evasion and Social Values > Economics]
Publication date :	26-Jun-2014
Edition :	Preliminary Version
Number of pages :	43
Peer reviewed :	No
Keywords :	[en] Corruption ; Multiple Equilibria ; Stigma
Abstract :	[en] We provide empirical support and a theoretical explanation for the vicious circle of political corruption and tax evasion in which countries often fall into. We address this issue in the context of a model with two distinct groups of agents: citizens and politicians. Citizens decide the fraction of their income for which they evade taxes. Politicians decide the fraction of the public budget that they peculate. We show that multiple self-fulfilling equilibria with different levels of corruption can emerge based on the existence of strategic complementarities, indicating that corruption may corrupt. Furthermore, we find that standard deterrence policies cannot eliminate multiplicity. Instead, policies that impose a strong moral cost on tax evaders and corrupt politicians can lead to a unique equilibrium.
Research centres :	University of Luxembourg-CREA
Target :	Researchers ; Students ; General public
Permalink :	http://hdl.handle.net/10993/17519

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Open access	4_FINAL PAPER_17_06_2014.pdf		Publisher postprint	320.73 kB	View/Open

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