Tax evasion in a principal-agent model with self-protection

Gatekeepers have an increasing role in taxation and regulation. While burdening them with legal liability for misconducts that benefit those who resort to their services actually discourages wrongdoings — as will be clarified in the paper — an alienation effect can also arise. That is, the gatekeeper might become more interested in covering up the illegal behavior and in cooperating with the perpetrator. Such perverse effects are difficult to detect and to measure. This paper studies the problem with respect to tax evasion by firms, by building upon the classical Allingham and Sandmo (1972) model and by providing a more detailed description of the "concealment costs" than that available in the literature, which often simply makes assumptions about their existence and their functional form. The relationship between a risk neutral firm owner aiming at evading taxes and a risk averse gatekeeper is described through a simple principal-agent framework. The paper highlights the role of legal rules pertaining to liability for tax evasion in shaping the parties choices, since concealment costs vary according to whether the risk neutral principal or the risk averse agent are held responsible when tax evasion is detected. The main result of the analysis is that there are simple conditions under which one can easily infer whether harnessing the agent is socially beneficial.tax evasion, firm, agency, risk aversion

The segregative properties of endogenous jurisdictions formation with a welfarist central government.

This paper examines the segregative properties of endogenous processes of jurisdiction formation à la Tiebout in the presence of a central government who makes equalization transfers to jurisdictions in such a way as to maximize a welfarist objective. Choice of location by households, of local public good provision by jurisdictions, and of equalization grants and tax by the central government are assumed to be made simultaneously, taking the choices of others as given. Two welfarist objectives for the central government are considered in turn: Leximin and Utilitarianism. If the central government pursues a Leximin objective, it is easily shown that the only stable jurisdiction structures that can emerge are those in which the jurisdictions' poorest households have all the same wealth. A richer class of stable jurisdiction structures are compatible with a central utilitarian government. Yet, it so happens that, if individual preferences are additively separable, the class of households preferences that garantee the segregation of any stable jurisdiction structure remains unchanged by the presence of a central government.

Internal migration and public policy

This paper studies the relation between internal migration and public spending on public goods. We describe centralized public policy when a central government is comprised of elected representatives from local electoral districts. Internal migration determines the median voter in the districts. The median voters decide the equilibrium policy through bargaining. We find the conditions under which voters' mobility results in larger or smaller public spending. Furthermore, the distance between the actual size and the efficient size of government spending depends on the way internal migration changes the distribution of income within and between districts

Inter-jurisdictional migration and the size of government

This paper develops a model of centralized public spending where decision-makers are the regional median voters instead of the national median voter of the received literature. Regional representatives decide the level of public spending by bargaining in the central legislature. We study how exogenous changes in the composition of the regional electorate either deteriorate or mitigate inter-jurisdictional redistributive conflicts and how these, in turn, influence the size of the government. We find the conditions under which migration-induced inter-regional income convergence (divergence) leads either to a bigger or a smaller government. Finally, the relationship between migration and efficiency is explored within the present framework

Inter-jurisdictional migration and the size of government

This paper develops a model of centralized public spending where decision-makers are the regional median voters instead of the national median voter of the received literature. Regional representatives decide the level of public spending by bargaining in the central legislature. We study how exogenous changes in the composition of the regional electorate either deteriorate or mitigate inter-jurisdictional redistributive conflicts and how these, in turn, influence the size of the government. We find the conditions under which migration-induced inter-regional income convergence (divergence) leads either to a bigger or a smaller government. Finally, the relationship between migration and efficiency is explored within the present framework

Internal migration and public policy

This paper studies the relation between internal migration and public spending on public goods. We describe centralized public policy when a central government is comprised of elected representatives from local electoral districts. Internal migration determines the median voter in the districts. The median voters decide the equilibrium policy through bargaining. We find the conditions under which voters' mobility results in larger or smaller public spending. Furthermore, the distance between the actual size and the efficient size of government spending depends on the way internal migration changes the distribution of income within and between districts

"Inter-jurisdictional migration and the size of government", MPRA Paper 42604, University Library of Munich, Germany

This paper develops a model of centralized public spending where decision-makers are the regional median voters instead of the national median voter of the received literature. Regional representatives decide on the level of public spending by bargaining in the central legislature. We study how exogenous changes in the composition of the regional electorate either deteriorate or mitigate inter-jurisdictional redistributive conflicts and how these, in turn, influence the size of the government. We find the conditions under which migration-induced inter-regional income convergence (divergence) leads either to a bigger or a smaller government. Finally, the relationship between migration and efficiency is explored within the present framework

The segregative properties of endogenous formation of jurisdictions with a welfarist central government

Forthcomin

On the Segregative Properties of Endogenous Jurisdiction Formation with a Central Government

This paper examines the segregative properties of endogenous processes of jurisdiction formation à la Tiebout in the presence of a central government who redistributes income across jurisdictions by maximizing a welfarist objective. Choices of location by households of local public good provision by jurisdiction and of redistribution by the central government are assumed to be made simultaneously, taking the choices of others as given. Two welfarist objectives for the central government are considered in turn: Leximin and Utilitarianism. If the central government pursues a Leximin objective, it is easily shown that the only stable jurisdiction structure that can emerge is essentially the trivial one in which all households live in the same jurisdiction. Richer classes of stable jurisdiction structures are compatible with a central utilitarian government. Yet, it happens that, if individual preferences are additively separable, the class of preferences that garantee the segregation of any stable jurisdiction structure remains unchanged by the presence of a central government.