Multiplier–Accelerator Interaction in the Presence of an Underground Economy and Taxation. (May 2018)

• Record Type: Journal Article
• Authors: Soldatos, Gerasimos T.
• Is Part Of: Margin. Volume 12:Number 2(2018:May)
• Page Start: 244
• Page End: 256
• Publication Date: 2018-05
• Subjects: Multiplier-accelerator -- Underground economy -- Taxation -- Stabilisation; Economics -- Periodicals; Economics -- India -- Periodicals; Economics -- Asia -- Periodicals; Economic policy -- Periodicals; Economic development -- Periodicals; Economic development -- India -- Periodicals; Economic development -- Asia -- Periodicals; India -- Economic policy -- Periodicals; Asia -- Economic policy -- Periodicals; 338.9
• DOI: 10.1177/0973801018757235
• Languages: English
• ISSNs: 0973-8010

Abstract

This article introduces the underground economy into a standard multiplier-accelerator model with linear progressive income taxation. The main results are that this introduction increases the instability of the overall economy towards chaos, that tax policy plays a critical role in preserving stability even if in the sense of a uniform cycle and that the operation of the accelerator may be countering the negative effect of tax evasion on tax revenue. JEL Classification: O17, E32, H24