Corruption, Growth, and Taxation英文文献资料.docVIP

Theoretical Economics Letters, 2012, 2, 62-66 /10.4236/tel.2012.21011 Published Online February 2012 (http://www.SciRP.org/journal/tel) Corruption, Growth, and Taxation* Yazid Dissou , Tatsiana Yakautsava # Department of Economics, University of Ottawa, Ottawa, Canada Email: { ydissou, tyaka023}@uottawa.ca # Received December 21, 2011; revised January 13, 2012; accepted January 20, 2012 ABSTRACT Several empirical papers have shown that corruption is an impediment to growth, as it mainly constitutes hindrance to investment. While there are few theoretical studies linking corruption and growth, none of the existing papers can ex- plain the fall in the growth-maximizing tax rate of the economy following reduction in corruption. We present an en- dogenous growth model where corruption hinders investment and decreases the growth-maximizing tax rate of the economy. Incentives to invest in private capital fall as the corrupt government diverts some portion of the tax revenue away from investment in public capital that has an impact on the return of private inputs. We show, using a nonlinear (concave) relationship between the intensity of corruption and the amount of wasted resources that reducing corruption can be beneficial not only to growth, but to the average taxpayer in the economy as the tax rate would fall. Keywords: Corruption; Economic Growth; Government; Taxes 1. Introduction This paper proposes a theoretical model to solve the puzzle. In our model, corruption acts as a hindrance to capital accumulation by lowering the private marginal product of capital. The simple model considers two cases in which corruption operates: a linear and a non-linear relationship between corruption intensity and tax revenue. In the first case, an increase in corruption shifts down the single-peaked growth function. Alternatively, a reduction in corruption stretches the “growth-possibility frontier” upward leaving the