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The shadow economy in Norway: Demand for currency approach

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Author Info
Shima, Isilda (Ragnar Frisch Centre for Economic Research)

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Abstract

The main purpose of this study is to measure the level of the shadow economy in Norway following the demand for currency approach. The question analysed is how well does this approach capture the level of shadow economy in front of a decreasing level of currency in circulation and an increasing use of electronic payment system. In this study is found a decreasing level of the shadow economy in Norway since mid 1990s starting with 8,8 percent of the shadow economy relative to GDP in 1991, up to 10.2 percent in 1995 and there after declining to a level of 5.6 percent of GDP in 2002. The explanation for the decline of the level of shadow economy relative to GDP could be the fact of a decreasing demand for currency for transaction going along with an increase of electronic payments instruments. Also, in Norway, a broad tax reform was implemented in 1992 with the purpose of reducing tax-induced distortions by lowering the tax rates and broadening the tax base. One of the main causes of the shadow economy, is considered to be the burden of direct and indirect tax to the individuals, but the complexity of the tax system is also an important factor that may have an impact on the level of shadow economy.

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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 10/2004.

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Length: 23 pages
Date of creation: 26 Oct 2004
Date of revision:
Handle: RePEc:hhs:osloec:2004_010

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Tax evasion; shadow economy; currency demand; econometrics;

Other versions of this item:

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

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References listed on IDEAS
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. Isachsen, Arne Jon & Strom, Steinar, 1980. " The Hidden Economy: The Labor Market and Tax Evasion," Scandinavian Journal of Economics, Blackwell Publishing, vol. 82(2), pages 304-11.
  2. Schneider, Friedrich, 2002. "The Size and Development of the Shadow Economies of 22 Transition and 21 OECD Countries," IZA Discussion Papers 514, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World - Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
    Other versions:
  4. Boeschoten, Willem C & Fase, Martin M G, 1992. "The Demand for Large Bank Notes," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 319-37, August. [Downloadable!] (restricted)
  5. Isachsen, Arne Jon & Strom, Steiner, 1985. "The Size and Growth of the Hidden Economy in Norway," Review of Income and Wealth, Blackwell Publishing, vol. 31(1), pages 21-38, March.
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Cited by:
(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. Brambila Macias, Jose, 2008. "The Dynamics of Parallel Economies. Measuring the Informal Sector in México," MPRA Paper 8400, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Stanisław Cichocki, 2008. "Shadow economy and its relations with tax system and state budget in Poland 1995 - 2007," Working Papers 2008-05, Faculty of Economic Sciences, University of Warsaw. [Downloadable!]
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This page was last updated on 2009-11-26.

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