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Fiscal consolidation with tax evasion and corruption

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorPappa, Evi
dc.contributor.authorSajedi, Rana
dc.contributor.authorVella, Eugenia
dc.date.accessioned2022-05-11T17:47:00Z
dc.date.available2022-05-11T17:47:00Z
dc.date.issued2015-07-01
dc.description.abstractCross-country evidence highlights the importance of tax evasion and corruption in determining the size of fiscal multipliers. We introduce these two features in a New Keynesian model and revisit the effects of fiscal consolidations. VAR evidence for Italy suggests that spending cuts reduce tax evasion, while tax hikes increase it. In the model, spending cuts induce a reallocation of production towards the formal sector, thus reducing tax evasion. Tax hikes increase the incentives to produce in the less productive shadow sector, implying higher output and unemployment losses. Corruption further amplifies these losses by requiring larger hikes in taxes to reduce debt. We use the model to assess the recent fiscal consolidation plans in Greece, Italy, Portugal and Spain. Our results corroborate the evidence of increasing levels of tax evasion during these consolidations and point to significant output and welfare losses, which could be reduced substantially by combating tax evasion and corruption.en
dc.identifier.bibliographicCitationPappa, E., Sajedi, R., & Vella, E. (2015). Fiscal consolidation with tax evasion and corruption. Journal of International Economics, 96, pp. S56-S75es
dc.identifier.doihttps://doi.org/10.1016/j.jinteco.2014.12.004
dc.identifier.issn0022-1996
dc.identifier.publicationfirstpageS56es
dc.identifier.publicationissueSupl.1es
dc.identifier.publicationlastpageS75es
dc.identifier.publicationtitleJOURNAL OF INTERNATIONAL ECONOMICSes
dc.identifier.publicationvolume96es
dc.identifier.urihttp://hdl.handle.net/10016/34783
dc.identifier.uxxiAR/0000029311
dc.language.isoenges
dc.publisherElsevieres
dc.rights© 2014 Elsevier B.V. All rights reserved.es
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España*
dc.rights.accessRightsopen accesses
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/*
dc.subject.ecienciaEconomíaes
dc.subject.ecienciaPolíticaes
dc.subject.jelE02
dc.subject.jelE62
dc.subject.jelH30
dc.subject.otherTax evasiones
dc.subject.otherCorruptionen
dc.subject.otherAusterityen
dc.subject.otherVARen
dc.subject.otherDSGE-modelen
dc.titleFiscal consolidation with tax evasion and corruptionen
dc.typeresearch article*
dc.type.hasVersionAM*
dspace.entity.typePublication
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