Tax to GDP ratios in the past 100 have risen substantially. One of the reasons for this is that taxes are used to fund welfare programmes. But what if giving people this access to these programmes, makes some of them want to try scam the system? A “moral hazard” effect.
A lecture at the LSE looks into it:
Let me summarize the claims in the lecture: Does this, moral hazard effect, make a difference? Yes. What is the magnitude if these effects? Mostly small. But have a look at the lecture. It’s worth it.