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Nonparametric expenditure-based estimation of income under-reporting and the underground economy

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  • Lindsay M. Tedds

Abstract

There 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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File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2004-17.pdf
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Bibliographic Info

Paper provided by McMaster University in its series Department of Economics Working Papers with number 2004-17.

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Length: 38 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mcm:deptwp:2004-17

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Cited by:
  1. Lindsay M. Tedds, 2005. "Keeping It Off The Books: An Empirical Investigation Into the Characteristics of Firms That Engage In Tax Non-Compliance," Department of Economics Working Papers 2005-01, McMaster University.
  2. Karine Torosyan & Randall K. Filer, 2012. "Tax Reform in Georgia and the Size of the Shadow Economy," Economics Working Paper Archive at Hunter College, Hunter College Department of Economics 439, Hunter College Department of Economics.
  3. Per Engstrom & Bertil Holmlund, 2009. "Tax evasion and self-employment in a high-tax country: evidence from Sweden," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(19), pages 2419-2430.
  4. Tonin, Mirco, 2011. "Minimum Wage and Tax Evasion: Theory and Evidence," IZA Discussion Papers 5660, Institute for the Study of Labor (IZA).
  5. Knut R. Wangen, 2005. "An Expenditure Based Estimate of Britain's Black Economy Revisited," Discussion Papers, Research Department of Statistics Norway 414, Research Department of Statistics Norway.

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