Fiscal consolidation with tax evasion and corruption

Using cross country data we show that tax evasion and corruption are highly important for determining the size of the .scal multiplier. We introduce these two features in a New Keynesian model with search and matching frictions, in order to revisit the e¤ects of tax and expenditure based consolidati...

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Autores: Pappa, Evi|||0000-0002-2393-0142, Sajedi, Rana, Vella, Eugenia|||0000-0001-7610-0903
Tipo de recurso: artículo
Fecha de publicación:2015
País:España
Institución:Universitat Autònoma de Barcelona
Repositorio:Dipòsit Digital de Documents de la UAB
Idioma:inglés
OAI Identifier:oai:ddd.uab.cat:203789
Acceso en línea:https://ddd.uab.cat/record/203789
https://dx.doi.org/urn:doi:10.1016/j.jinteco.2014.12.004
Access Level:acceso abierto
Palabra clave:DSGE model
Matching frictions
Shadow economy
Corruption
Fiscal consolidation
VAR
Policy analysis
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spelling Fiscal consolidation with tax evasion and corruptionPappa, Evi|||0000-0002-2393-0142Sajedi, RanaVella, Eugenia|||0000-0001-7610-0903DSGE modelMatching frictionsShadow economyCorruptionFiscal consolidationVARPolicy analysisUsing cross country data we show that tax evasion and corruption are highly important for determining the size of the .scal multiplier. We introduce these two features in a New Keynesian model with search and matching frictions, in order to revisit the e¤ects of tax and expenditure based consolidations. VAR evidence for Italy suggests that expenditure based consolidations reduce tax evasion signi.cantly, while tax based ones increase it. In the model, expenditure cuts reduce demand for both formal and informal goods, and, thus, tax evasion. Tax hikes induce agents to work and produce more in the informal sector, which is less productive, and so imply higher output and welfare losses. We use the model to assess the losses from the recent .scal consolidation plans in Italy, Spain, Portugal and Greece. Policy conclusions are sensitive to the model.s assumptions. Counterfactual exercises highlight the benefit of .ghting tax evasion and corruption in economies undertaking .scal consolidation. 22015-01-0120152015-01-01Articlehttp://purl.org/coar/resource_type/c_6501AMhttp://purl.org/coar/version/c_ab4af688f83e57aainfo:eu-repo/semantics/articleapplication/pdfhttps://ddd.uab.cat/record/203789https://dx.doi.org/urn:doi:10.1016/j.jinteco.2014.12.004reponame:Dipòsit Digital de Documents de la UABinstname:Universitat Autònoma de BarcelonaInglésengMinisterio de Economía y Competitividad https://doi.org/10.13039/501100003329 ECO2012-32392open accesshttp://purl.org/coar/access_right/c_abf2Aquest material està protegit per drets d'autor i/o drets afins. Podeu utilitzar aquest material en funció del que permet la legislació de drets d'autor i drets afins d'aplicació al vostre cas. Per a d'altres usos heu d'obtenir permís del(s) titular(s) de drets.https://rightsstatements.org/vocab/InC/1.0/info:eu-repo/semantics/openAccessoai:ddd.uab.cat:2037892026-06-06T12:50:31Z
dc.title.none.fl_str_mv Fiscal consolidation with tax evasion and corruption
title Fiscal consolidation with tax evasion and corruption
spellingShingle Fiscal consolidation with tax evasion and corruption
Pappa, Evi|||0000-0002-2393-0142
DSGE model
Matching frictions
Shadow economy
Corruption
Fiscal consolidation
VAR
Policy analysis
title_short Fiscal consolidation with tax evasion and corruption
title_full Fiscal consolidation with tax evasion and corruption
title_fullStr Fiscal consolidation with tax evasion and corruption
title_full_unstemmed Fiscal consolidation with tax evasion and corruption
title_sort Fiscal consolidation with tax evasion and corruption
dc.creator.none.fl_str_mv Pappa, Evi|||0000-0002-2393-0142
Sajedi, Rana
Vella, Eugenia|||0000-0001-7610-0903
author Pappa, Evi|||0000-0002-2393-0142
author_facet Pappa, Evi|||0000-0002-2393-0142
Sajedi, Rana
Vella, Eugenia|||0000-0001-7610-0903
author_role author
author2 Sajedi, Rana
Vella, Eugenia|||0000-0001-7610-0903
author2_role author
author
dc.subject.none.fl_str_mv DSGE model
Matching frictions
Shadow economy
Corruption
Fiscal consolidation
VAR
Policy analysis
topic DSGE model
Matching frictions
Shadow economy
Corruption
Fiscal consolidation
VAR
Policy analysis
description Using cross country data we show that tax evasion and corruption are highly important for determining the size of the .scal multiplier. We introduce these two features in a New Keynesian model with search and matching frictions, in order to revisit the e¤ects of tax and expenditure based consolidations. VAR evidence for Italy suggests that expenditure based consolidations reduce tax evasion signi.cantly, while tax based ones increase it. In the model, expenditure cuts reduce demand for both formal and informal goods, and, thus, tax evasion. Tax hikes induce agents to work and produce more in the informal sector, which is less productive, and so imply higher output and welfare losses. We use the model to assess the losses from the recent .scal consolidation plans in Italy, Spain, Portugal and Greece. Policy conclusions are sensitive to the model.s assumptions. Counterfactual exercises highlight the benefit of .ghting tax evasion and corruption in economies undertaking .scal consolidation.
publishDate 2015
dc.date.none.fl_str_mv 2
2015-01-01
2015
2015-01-01
dc.type.none.fl_str_mv Article
http://purl.org/coar/resource_type/c_6501
AM
http://purl.org/coar/version/c_ab4af688f83e57aa
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://ddd.uab.cat/record/203789
https://dx.doi.org/urn:doi:10.1016/j.jinteco.2014.12.004
url https://ddd.uab.cat/record/203789
https://dx.doi.org/urn:doi:10.1016/j.jinteco.2014.12.004
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.relation.none.fl_str_mv Ministerio de Economía y Competitividad https://doi.org/10.13039/501100003329 ECO2012-32392
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
https://rightsstatements.org/vocab/InC/1.0/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
https://rightsstatements.org/vocab/InC/1.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Dipòsit Digital de Documents de la UAB
instname:Universitat Autònoma de Barcelona
instname_str Universitat Autònoma de Barcelona
reponame_str Dipòsit Digital de Documents de la UAB
collection Dipòsit Digital de Documents de la UAB
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