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Asymmetric Responses of the Underground Economy to Tax Changes: Evidence from New Zealand Data

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Author Info
Giles, David E A
Werkneh, Gugsa T
Johnson, Betty J

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Abstract

This paper considers the relationship between taxes and the size of the New Zealand underground economy. Previous studies indicate that a positive relationship exists in this and certain other countries. This paper addresses the question: "Is the response of the underground economy to an increase in taxes the same as its response to a decrease in taxes?" We find that although the effect on the underground economy of an upward movement in the effective tax rate is numerically greater than that of a downward tax movement, this difference is not statistically significant. Copyright 2001 by The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 77 (2001)
Issue (Month): 237 (June)
Pages: 148-59
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Handle: RePEc:bla:ecorec:v:77:y:2001:i:237:p:148-59

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  2. David E. A. Giles & Betty J. Johnson, 1999. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 9910, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
  3. Watson, Harry, 1985. "Tax evasion and labor markets," Journal of Public Economics, Elsevier, vol. 27(2), pages 231-246, July. [Downloadable!] (restricted)
  4. Giles, David E A, 1999. "The Rise and Fall of the New Zealand Underground Economy: Are the Responses Symmetric?," Applied Economics Letters, Taylor and Francis Journals, vol. 6(3), pages 185-89, March. [Downloadable!] (restricted)
  5. David E. A. Giles, 1999. "Modelling the Hidden Economy and the Tax-Gap in New Zealand," Econometrics Working Papers 9905, Department of Economics, University of Victoria. [Downloadable!]
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  6. David E. A. Giles, 1998. "Modelling the Tax Compliance Profiles of New Zealand Firms: Evidence from Audit Records," Econometrics Working Papers 9803, Department of Economics, University of Victoria. [Downloadable!]
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  7. Pencavel, John H., 1979. "A note on income tax evasion, labor supply, and nonlinear tax schedules," Journal of Public Economics, Elsevier, vol. 12(1), pages 115-124, August. [Downloadable!] (restricted)
  8. Kesselman, Jonathan R., 1989. "Income tax evasion : An intersectoral analysis," Journal of Public Economics, Elsevier, vol. 38(2), pages 137-182, March. [Downloadable!] (restricted)
  9. Patrick J. Caragata, & David E. A. Giles, 1998. "Simulating the Relationship Between the Hidden Economy and the Tax Level and Tax Mix in New Zealand," Econometrics Working Papers 9804, Department of Economics, University of Victoria. [Downloadable!]
  10. David E. A. Giles, & Patrick J. Caragata, 1999. "The Learning Path of the Hidden Economy: The Tax Burden and Tax Evasion in New Zealand," Econometrics Working Papers 9904, Department of Economics, University of Victoria. [Downloadable!]
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  11. Trandel, Greg & Snow, Arthur, 1999. "Progressive income taxation and the underground economy," Economics Letters, Elsevier, vol. 62(2), pages 217-222, February. [Downloadable!] (restricted)
  12. Giles, David E A, 1997. "Causality between the Measured and Underground Economies in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 63-67, January. [Downloadable!] (restricted)
  13. Bacon, Robert W., 1991. "Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes," Energy Economics, Elsevier, vol. 13(3), pages 211-218, July. [Downloadable!] (restricted)
  14. Crane, Steven E & Nourzad, Farrokh, 1987. "On the Treatment of Income Tax Rates in Empirical Analysis of Tax Evasion," Kyklos, Blackwell Publishing, vol. 40(3), pages 338-48.
  15. Cheung, Yin-Wong & Chinn, Menzie David & Tran, Tuan, 1995. "How Sensitive Are Trends to Data Definitions? Results for East Asian and G5 Countries," Applied Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 1-6, January. [Downloadable!] (restricted)
  16. Koskela, Erkki, 1983. "A note on progression, penalty schemes and tax evasion," Journal of Public Economics, Elsevier, vol. 22(1), pages 127-133, October. [Downloadable!] (restricted)
  17. Leybourne, S J & McCabe, B P M, 1994. "A Simple Test for Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 97-103, February.
  18. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
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  19. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
  20. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August. [Downloadable!] (restricted)
  21. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
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  22. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Blackwell Publishing, vol. 4(3), pages 249-73.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David E. A. Giles & Betty J. Johnson, 2000. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 0006, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
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