HUMAN CAPITAL FORMATION AND TAX EVASION
Version of Record online: 2 APR 2012
© 2012 The Author. Bulletin of Economic Research © 2012 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
Bulletin of Economic Research
Volume 65, Issue 1, pages 91–105, January 2013
How to Cite
Goerke, L. (2013), HUMAN CAPITAL FORMATION AND TAX EVASION. Bulletin of Economic Research, 65: 91–105. doi: 10.1111/j.1467-8586.2012.00436.x
- Issue online: 10 DEC 2012
- Version of Record online: 2 APR 2012
- human capital;
- income tax;
- tax evasion
A strictly risk-averse individual with an exogenous gross income in period one can acquire human capital in the same period and evade taxes. Period-two income rises with educational investments in period one and can also be hidden from tax authorities. It is shown that a greater tax deductibility of educational investments and higher individual ability induce a positive correlation between tax evasion and educational investments in period two, whereas the relationship in period one is ambiguous. These theoretical predictions can explain diverse empirical findings on the correlation between education and tax evasion.