Recently there has been a resurgence of interest internationally in measuring the size of the underground economies. This has led to new approaches to this problem, and a more rigorous treatment of the associated time-series issues. In this paper we compare our recent underground economy results for Canada and New Zealand. These results provide time-series measures of the (legally-based plus illegally-based) underground economies in those countries, over similar historical periods, obtained via the same methodology. This methodology involves the estimation of structural MIMIC models, calibrated by estimating nonlinear currency-demand models. In addition to providing the underground economy measures themselves, we also compare the medium-term trends and cyclical characteristics of underground output in these two countries, and their responsiveness to changes in taxation policies. Special attention is paid to the effects on the New Zealand and Canadian underground economies of the Goods and Services Taxes in 1986 and 1991 respectively. These taxes are virtually identical in their design, but the context of their implementation led to quite different impacts on the associated underground economies.
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Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number
0003.
Length: 16 pages Date of creation: 14 Apr 2000 Date of revision: Handle: RePEc:vic:vicewp:0003
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Find related papers by JEL classification: C5 - Mathematical and Quantitative Methods - - Econometric Modeling H1 - Public Economics - - Structure and Scope of Government H2 - Public Economics - - Taxation, Subsidies, and Revenue
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