A Model of Firm Formality and Tax Evasion
Abstract/Contents
- Abstract
- Rampant informality in developing economies proves to be a major obstacle to public revenue collection, limiting investment in crucial public infrastructure. The model presented in this paper sheds light on inter-firm mechanisms that motivate firms to either transact formally or transact informally and evade taxes. The formulation allows us to predict comparative statics on a variety of parameters, including the effective tax rate, the likelihood of audit, the penalties levered against firms caught transacting informally, and the distribution of firm sizes in the economy. Empirical support for each of these predictions is discussed. In particular, the model provides theoretical underpinnings for predicting the effect of multinational entry and trade liberalization on the size of the informal sector—two questions which have hitherto been largely neglected in the literature.
Description
Type of resource | text |
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Date created | May 2016 |
Creators/Contributors
Author | Sangani, Kunal | |
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Primary advisor | Jackson, Matthew | |
Degree granting institution | Stanford University, Department of Economics |
Subjects
Subject | Stanford Department of Economics |
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Genre | Thesis |
Bibliographic information
Related item | |
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Location | https://purl.stanford.edu/cp747fr3982 |
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
Preferred citation
- Preferred Citation
- Sangani, Kunal. (2016). A Model of Firm Formality and Tax Evasion. Stanford Digital Repository. Available at: https://purl.stanford.edu/cp747fr3982
Collection
Stanford University, Department of Economics, Honors Theses
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