The above novel features of our mod

The above novel features of our model introduce a trade-off between tax evasion and output
growth rates, which is an important consideration for our social planner type government in determining
welfare maximizing policies. Using data from 35 OECD and 110 non-OECD countries
we first present empirical estimates of the tax evasion function at an aggregate level, confirming
Roubini and Sala-i-Martin (1995) assumption on the relation between the two policy variables and
evasion rates. These estimates are then used to assess the long-run effects of the two policy variables
on government’s utility maxmimization by simulating our model for the two groups of countries
separately.