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Can Tax Evasion Tame Leviathan Governments?

Frode Brevik & Manfred Gärtner

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abstract This paper asks to what extent institutional features that facilitate tax evasion may keep Leviathan governments at bay. The specific feature we look at is banking secrecy abroad. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady-state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonic as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.
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type journal paper
   
keywords Leviathan government, income tax, tax evasion, public spending, rent seeking
   
project Konventionelle und neue Medien in der volkswirtschaftlichen Ausbildung
language English
kind of paper journal article
date of appearance 6-6-2008
journal Public Choice
publisher Springer Netherlands
ISSN 0048-5829
ISSN (online) 1573-7101
volume of journal 136
number of issue 1-2, July
page(s) 103-122
review double-blind review
   
citation Brevik, F., & Gärtner, M. (2008). Can Tax Evasion Tame Leviathan Governments?. Public Choice, 136(1-2, July), 103-122.