TY - UNPB

T1 - Public Good Provision

T2 - A Tale of Tax Evasion and Corruption

AU - Anwar, Chowdhury Mohammad Sakib

AU - Matros, Alexander

AU - Sen Gupta, Sonali

PY - 2020/7/3

Y1 - 2020/7/3

N2 - We develop a model that links tax evasion, corruption, and public good provision.In our model, citizens pay or evade taxes into the public fund, which a corruptgovernor redistributes. Each citizen forms expectations about the amount of public goods the governor should provide. After observing the actual level of public goods, a citizen punishes the governor if this level is below his expectations.We describe three types of equilibria: tax evasion, efficient public good provision, and symmetric mixed-strategy. We show that the highest expectations can lead to no free riding (tax evasion) and the efficient level of public good provision even with the corrupt governor and without punishment for tax evasion.

AB - We develop a model that links tax evasion, corruption, and public good provision.In our model, citizens pay or evade taxes into the public fund, which a corruptgovernor redistributes. Each citizen forms expectations about the amount of public goods the governor should provide. After observing the actual level of public goods, a citizen punishes the governor if this level is below his expectations.We describe three types of equilibria: tax evasion, efficient public good provision, and symmetric mixed-strategy. We show that the highest expectations can lead to no free riding (tax evasion) and the efficient level of public good provision even with the corrupt governor and without punishment for tax evasion.

KW - Tax evasion

KW - Audits

KW - Embezzlement

KW - Corruption

KW - Sanctions

KW - Public goods

M3 - Working paper

T3 - Economics Working Papers Series

BT - Public Good Provision

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -