This paper shows that underground activities and tax evasion may be a source of possible non-keynesian effect of fiscal policy when local indeterminacy of the equilibrium path is allowed. We show that under indeterminacy, an increase in corporate, labor or income tax rates pushes the economy into an expansionary pattern. These effects are reversed when the steady state is saddle-path stable.

Fiscal policy under indeterminacy and tax evasion

MARCHETTI, Enrico;BUSATO, Francesco;CHIARINI, Bruno
2005

Abstract

This paper shows that underground activities and tax evasion may be a source of possible non-keynesian effect of fiscal policy when local indeterminacy of the equilibrium path is allowed. We show that under indeterminacy, an increase in corporate, labor or income tax rates pushes the economy into an expansionary pattern. These effects are reversed when the steady state is saddle-path stable.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11367/23881
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