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The Underground Economy: Minimizing the Size of Government

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Abstract

This paper duscusses tha author's wok on measuring and modelling the New Zealand underground economy, 1968-1994. Particular attention is paid to the relationship between this activity and taxation policy. An optimal level for the effective tax rate is reported, in terms of maximizing the impact on the underground economy. The implications for the "tax gap" in that country are examined, and some possible implications for Canada are drawn by combining these results with those of other authors for the latter country.

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Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 9808.

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Length: 18 pages
Date of creation: 31 Mar 1998
Date of revision:
Handle: RePEc:vic:vicewp:9808

Note: ISSN 1485-6441. This paper was presented at the Fraser Institute Conference on "How to Spend the Fiscal Dividend : What is the Optimal Size of Government?", Ottawa, December, 1997.
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Web page: http://web.uvic.ca/econ
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Related research

Keywords: Hidden Economy; Underground Economy; Tax Avoidance; Tax Evasion; Tax Gap;

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References

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  1. Rolf Mirus & Roger S. Smith & Vladimir Karoleff, 1994. "Canada's Underground Economy Revisited: Update and Critique," Canadian Public Policy, University of Toronto Press, vol. 20(3), pages 235-252, September.
  2. 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.
  3. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters, in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc.
  4. Frey, Bruno S & Pommerehne, Werner W, 1984. "The Hidden Economy: State and Prospects for Measurement," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 30(1), pages 1-23, March.
  5. David Giles, 1997. "Causality between the measured and underground economies in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 63-67.
  6. David Giles, 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 185-189.
  7. Giles, David E A, 1997. "Testing for Asymmetry in the Measured and Underground Business Cycles in New Zealand," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 225-32, September.
  8. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
  9. David Giles, 1997. "The hidden economy and tax-evasion prosecutions in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 4(5), pages 281-285.
  10. David E. A. Giles, 1998. "The Hidden Economy and the Tax-Gap in New Zealand: A Latent Variable Analysis," Econometrics Working Papers 9807, Department of Economics, University of Victoria.
  11. David E. A. Giles, & Patrick J. Caragata, 1998. "The Learning Path of the Hidden Economy:Tax and Growth Effects in New Zealand," Econometrics Working Papers 9805, Department of Economics, University of Victoria.
  12. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, October.
  13. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303.
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Citations

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Cited by:
  1. Buehn, Andreas & Schneider, Friedrich, 2009. "Corruption and the Shadow Economy: A Structural Equation Model Approach," IZA Discussion Papers 4182, Institute for the Study of Labor (IZA).
  2. Roberto Dell’Anno & Miguel Gómez-Antonio & Angel Pardo, 2007. "The shadow economy in three Mediterranean countries: France, Spain and Greece. A MIMIC approach," Empirical Economics, Springer, vol. 33(1), pages 51-84, July.
  3. Máximo Torero & Miguel Robles & Manuel Hernández & Jorge de la Roca & Maureen Webber & Desmond Thomas, 2006. "The Informal Sector in Jamaica," IDB Publications 21978, Inter-American Development Bank.
  4. Andreas Buehn & Friedrich Schneider, 2012. "Corruption and the shadow economy: like oil and vinegar, like water and fire?," International Tax and Public Finance, Springer, vol. 19(1), pages 172-194, February.
  5. Max Gillman & Dario Cziráky, 2004. "Inflation and Endogenous Growth in Underground Economies," The wiiw Balkan Observatory Working Papers 050, The Vienna Institute for International Economic Studies, wiiw.

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