Tax evasion in a Cournot oligopoly with endogenous entry

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. If an additional competitor reduces output per firm in a homogenous Cournot-oligopoly, market entry will be excessive. Taxes can correct the so-called business stealing externality. We investigate how evading a tax on operating profits affects the excessive entry prediction. Tax evasion raises the number of firms in market equilibrium and can alter their welfare-maximizing number. In consequence, evasion can aggravate or mitigate excessive entry. Which of these outcomes prevails is determined by the direct welfare consequences of tax evasion and the relationship between evasion and the tax base. We also determine conditions which imply that overall welfare declines with tax evasion. Terms of use: Documents in EconStor mayJEL-Codes: D430, H260, L130.

Collaborative Profit Tax Evasion, Wage Inequality and Income Distribution: A General Equilibrium Analysis

“…In addition, the behavior of manufacturing rm evading taxes forces them to transfer some pro t to unskilled labor, in order to gain the support of un-ethic evading-tax behavior, which will further encourage unskilled labor migration. However, manufacturing rms, in order to maximize its pro t, will depress basic salary of unskilled labor even though there is a certain ratio of wage-saving sharing, which is depicted in (12).…”

“…The reason is that in a collusive tax evasion game with multiple equilibria as shown in Chang and Lai (2004), social norms affect the range of equilibria and act as an equilibrium selection device. Goerke (2017) investigates the impact of pro t tax evasion on rms' output decisions in a Cournot oligopoly setting in which the market structure is determined endogenously. It is shown that tax evasion intensi es market entry and raises aggregate output, while production of each incumbent rm decreases.…”