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Capital Income Tax Evasion, Capital Accumulation and Welfare

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Authors
Kato, Hideya; Yanagihara, Mitsuyoshi
Issue Date
2010
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, vol.23, no.3, pp. 341-363
Keywords
Tax evasionCapital accumulationOverlapping-generations modelWelfare trade-offs
Abstract
We construct an overlapping-generations model where individuals
evade capital income tax and carry out the short- and the longrun
analyses to abstract the pure effects of policy parameters such
as the capital income tax rate and the penalty rate on welfare
levels. We show that: (i) undeclared savings may increase both in
the short- and the long-run, even when the tax rate (the penalty
rate) decreases (increases); (ii) there are trade-offs within each policy
and across policies regarding the welfare effects in the short- and
the long-run; (iii) both the welfare levels and the government revenue
increase in the long-run if the tax rate decreases or the penalty
rate increases, as long as the elasticities of such parameters
on capital stock are sufficiently large.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/69814
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.23 no.1/4 (2010)
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