@TechReport{iza:izadps:dp13483,
            	author={Canta, Chiara and Cremer, Helmuth and Gahvari, Firouz},
            	title={Welfare Improving Tax Evasion},
            	year={2020},
	month={Jul},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={13483},
            	url={https://www.iza.org/publications/dp13483},
	abstract={We study optimal income taxation in a framework where one's willingness to report his income truthfully is positively correlated with his type. We show that allowing low-productivity types to cheat leads to Pareto-superior outcomes as compared to deterring them, even if audits can be performed costlessly. When there is no cheating, redistribution takes place on first- and second-best frontiers and can never make low-ability types more well-off than high-ability types. Letting low-ability types cheat allows first-best redistribution up to a limit at which low-ability types are better off than high-ability types.},
	keywords={audits;tax evasion;optimal taxation;welfare-improving},
            }