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<p>This paper aims to quantitatively assess how income inequality, corruption and tax evasion affect tax policy in a small open economy such as Cameroon. Using Bayesian estimation techniques through the Sequence Space Jacobian (SSJ) method, we estimate two heterogeneous agent models (HANK model), one with corruption and tax evasion and another without corruption and tax evasion. We find evidence of the key role of corruption and tax evasion as a mechanism for amplifying the response to asymmetric shocks. Our models also reveal that most domestic variables are less sensitive to shocks from the rest of CEMAC, while corruption and tax evasion increase inflation. Finally, a counterfactual analysis shows that taking income inequalities in the implementation of fiscal policy increases production and consumption and reduces the public deficit.</p>

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Tax Policy with Heterogeneous Agents, Corruption and Tax Evasion in Developing Countries: Case of Cameroon

  • 期刊论文

  • 发表日期：

    2026年6月15日

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  • Franck Xavier Signe

摘要

This paper aims to quantitatively assess how income inequality, corruption and tax evasion affect tax policy in a small open economy such as Cameroon. Using Bayesian estimation techniques through the Sequence Space Jacobian (SSJ) method, we estimate two heterogeneous agent models (HANK model), one with corruption and tax evasion and another without corruption and tax evasion. We find evidence of the key role of corruption and tax evasion as a mechanism for amplifying the response to asymmetric shocks. Our models also reveal that most domestic variables are less sensitive to shocks from the rest of CEMAC, while corruption and tax evasion increase inflation. Finally, a counterfactual analysis shows that taking income inequalities in the implementation of fiscal policy increases production and consumption and reduces the public deficit.