Year of Graduation
Social Capital and Quality of Government Control
Economics: Research Programme
This paper considers a tax evasion model in which each agent makes a decision depending on their personal cost of lying, equilibrium tax rate and beliefs about the amount of honest people in the economy. The share of honest people here is a measure of social capital. The taxes collected from agents are spent on the production of public good, the volume of which decreases depending on the quality of government. As a result, it turns out that the low quality of public administration can maintain a high level of social capital. This contradicts the conclusions of most previous works on this topic (See Algan, Aghion, Cahuc and Shleifer (2009) and Pinotti (2009)). Nevertheless, the obtained result is confirmed by empirical studies showing the non-standard dependence of these parameters (See Satyanath, Voigtlander, Voth (2013) and Acemoglu, Reed, Robinson (2014)).