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Mohamed Jellal
''Informal sector gouvernance and regulation''
( 2010, Vol. 30 No.1 )
In this paper, we present a model of tax evasion in the presence of imperfect auditing. We show that there is a clear link between the degree of observability associated with respect to fiscal agency. We also show that the degree of observability is critical in determining the optimal regulation policies to be followed by the fiscal authorities. Our imperfect monitoring approach provides a new strategy for understanding the informal sector in developing countries, which can be interpreted as that group of economic activities characterized by low observability.
Keywords: governance, regulation, imperfect auditing, tax evasion, informal sector
JEL: H3 - Fiscal Policies and Behavior of Economic Agents: General
O1 - Economic Development: General
Manuscript Received : Aug 19 2009 Manuscript Accepted : Mar 10 2010

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