Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67437
Authors: 
Busato, Francesco
Chiarini, Bruno
Marchetti, Enrico
Year of Publication: 
2010
Citation: 
[Journal:] The Open Economics Journal [ISSN:] 1874-9194 [Publisher:] Bentham Open [Place:] Sharjah [Volume:] 3 [Year:] 2010 [Pages:] 14-24
Abstract: 
This paper shows that an increase in corporate/labor/income tax rates may push an economy with tax evasion into an expansionary pattern, under increasing returns to scale. These effects would be reversed when the steady state is saddle-path stable. This model does not undertake a full identification. The interesting feature of our results is that fiscal policy in an economy with a significant underground sector may provide inadvisable outcomes. Thus, tax policies can generate counterproductive results in an economy characterized by existence of aggregate increasing returns to scale and underground activities.
Subjects: 
dynamic general equilibrium models
fiscal policy
tax evasion and underground activities
indeterminacy and sunspots
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article
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