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PUBLIC DEBT MANAGEMENT AND TAX EVASION

Published online by Cambridge University Press:  17 June 2019

Amedeo Argentiero  and
Roy Cerqueti
Amedeo Argentiero*
Affiliation:
University of Perugia
Roy Cerqueti
Affiliation:
University of Macerata
*
Address correspondence to: Amedeo Argentiero, University of Perugia, Department of Economics, Via A. Pascoli 20, 06123 Perugia, Italy, e-mail: amedeo.argentiero@unipg.it. Phone: +39 075 5855293; Fax: +39 075 5855299.
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Abstract

This paper deals with the optimal management of the public debt-to-GDP ratio. We specifically focus on a contrasting tax evasion-based strategy for controlling the debt-to-GDP ratio. Two devices can be employed by the policymaker: by the one side, the tax rate is to be applied to the tax payers; by the other side, the monitoring activity is to be performed in order to detect the evaded taxes. To pursue our scopes, a stochastic control problem is developed and solved. Some numerical experiments validate the theoretical proposal and lead to an intuitive discussion of the obtained findings.

Keywords

Public Debt-to-GDP RatioTax EvasionTax RateEvasion MonitoringStochastic ControlDynamic Programming
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 3 , April 2021 , pp. 669 - 692
Copyright
© Cambridge University Press 2019

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Footnotes

We are grateful to Angelo Antoci, Luca Gori, Mauro Sodini, two anonymous Referees, and the participants to the NED-CICSE 2017 Workshop held in Pisa in September 2017 for the very useful comments. Of course, we are the solely responsible of any errors.

References

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