According to increasing marginal tendency to tax avoidance, we establish a dynamic theoretical model, which illustrates an inverted U-curve relationship between economic growth and income inequality in the long run. This finding stands in sharp contrast to the Kuznets curve—whereby inequality...

We present a model of income tax avoidance with heterogeneous agents, assuming the presence of a comparison income effect and of a psychic cost (disutility) of tax dodging. We analyse the policy preferences of the agents, and identify a median-voter political equilibrium. Paralleling previous...

Both buyers and sellers of goods and services may bene.t from letting their economic transactions go unrecorded for tax purposes. The supplier reduces his tax burden by underreporting income, whereas the consumer gains from buying a non-taxed lower-priced product. The distributional implications...