Date of Award
Doctor of Philosophy (PhD)
Dr. James R. Alm
Dr. Jorge L. Martinez-Vazquez
Dr. Yongsheng Xu
Dr. Martin F. Grace
This dissertation consists of three essays addressing two issues related to crime and tax evasion. The first essay investigates the relationship between property and violent crime with law enforcement expenditures. The second essay examines the market structure in transition economies and the effects on firm-level tax evasion. The third essay investigates the incidence of tax evasion in a general equilibrium framework. The topics in all three essays are linked by their focus on criminal or illegal behavior. The essays also answer questions related to developing sound governmental policy and decision-making.
Chapter one attempts to identify the impact on crime of increasing law enforcement expenditures. We examine the specific channels the public has to influence crime (e.g., the level of expenditures, the number of police officers), to determine what role, if any, they may play in influencing crime rates for property crime and for violent crime. Conclusions in previous research are equivocal, and often do not adequately address the obvious simultaneity of crime and enforcement efforts. We use the Arellano-Bond system GMM estimation method to control for this simultaneity. Results from our preferred GMM estimation method show clearly that increases in law enforcement expenditures help reduce crime rates; other methodologies typically give results that are not robust.
The second chapter extends previous empirical work evaluating the determinants of tax evasion by firms in which tax evasion may be similar to a tax advantage under the law. This chapter contributes to the tax evasion literature by identifying market structures in which it may be easier to evade or where high levels of evasion take place. Results indicate that fighting corruption is still an important factor in determining the level of evasion. However, the data also suggests a long run situation in which the tax advantage of evasion has been replicated and competed away; more competitive markets have lower levels of evasion whereas monopolistic markets have higher levels of evasion. Further, tax evasion will occur in more service oriented industries.
Chapter three develops and calibrates a general equilibrium model to investigate how tax evasion affects the incidence of taxes. Previous tax incidence work has considered tax evasion; however little has been done considering the distributional impact of tax evasion. There may be cases in which individuals, other than evaders, indirectly benefit or lose from tax evasion. This work contributes to the literature by clearly linking the individual or firm decision to evade to a general equilibrium analysis of tax evasion using microeconomic foundations. Including evasion decisions in tax incidence analysis has implications for both tax policy and enforcement agency decision making, and is an important step toward understanding how evasion affects the whole economy.
Turner, Sean C., "Essays on Crime and Tax Evasion." Dissertation, Georgia State University, 2010.