Nonparametric expenditure-based estimation of income under-reporting and the underground economy
AbstractThere is considerable interest in measuring the underground economy using microeconomic data. One such method estimates income under-reporting by households by assuming a known, parametric form of the Engel curve and making the further parametric assumption that households under-report their income by a constant fraction, independent of income. This paper proposes a nonparametric approach which avoids functional form restrictions and enables the reporting function to vary across income levels and household characteristics. I illustrate by estimating the effect of the Canadian Goods and Services Tax on income under-reporting.
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Bibliographic InfoPaper provided by McMaster University in its series Department of Economics Working Papers with number 2004-17.
Length: 38 pages
Date of creation: 2004
Date of revision:
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Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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