This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Asymmetric Responses of the Underground Economy to Tax Changes: Evidence From New Zealand Data

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
David E. A. Giles ()
Gugsa T. Werkneh ()
Betty J. Johnson ()

Additional information is available for the following registered author(s):

Abstract

We consider the relationship between taxes and the size of the underground economy in New Zealand. Previous studies indicate that a positive relationship exists in this and certain other countries. We address the following question: "Is the response of the underground economy to an increase in taxes the same as its response to a decrease in taxes?" To answer this question we modify an existing methodology for testing for both "timing symmetry" and "pattern symmetry". Paying careful attention to the non-stationarity and cointegration of our annual data, we test for the presence of such symmetry in the tax-evasion relationship for New Zealand. We find that although the effect on the underground economy of an upward movement in the effective tax rate is numerically greater than that of a downward tax movement, this difference is not statistically significant in either the short-run or the long-run. Elasticity and multiplier calculations allow us to quantify some of the effects of changes in taxation policy on hidden output.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://web.uvic.ca/econ/ewp9911.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 9911.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 21 pages
Date of creation: 11 Aug 1999
Date of revision:
Handle: RePEc:vic:vicewp:9911

Note: ISSN 1485-6441
Contact details of provider:
Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Phone: (250)721-8540
Fax: (250)721-6214
Web page: http://web.uvic.ca/econ
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (David Giles).

Related research
Keywords: Tax evasion underground economy tax rates asymmetry

Other versions of this item:

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

This paper has been announced in the following NEP Reports:

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. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  2. David E. A. Giles & Betty J. Johnson, 1999. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 9910, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
  3. Watson, Harry, 1985. "Tax evasion and labor markets," Journal of Public Economics, Elsevier, vol. 27(2), pages 231-246, July. [Downloadable!] (restricted)
  4. Giles, David E A, 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 185-89, March. [Downloadable!] (restricted)
  5. David E. A. Giles, 1999. "Modelling the Hidden Economy and the Tax-Gap in New Zealand," Econometrics Working Papers 9905, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
  6. David E. A. Giles, 1998. "Modelling the Tax Compliance Profiles of New Zealand Firms: Evidence from Audit Records," Econometrics Working Papers 9803, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
  7. Pencavel, John H., 1979. "A note on income tax evasion, labor supply, and nonlinear tax schedules," Journal of Public Economics, Elsevier, vol. 12(1), pages 115-124, August. [Downloadable!] (restricted)
  8. Kesselman, Jonathan R., 1989. "Income tax evasion : An intersectoral analysis," Journal of Public Economics, Elsevier, vol. 38(2), pages 137-182, March. [Downloadable!] (restricted)
  9. 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. [Downloadable!]
  10. David E. A. Giles, & Patrick J. Caragata, 1999. "The Learning Path of the Hidden Economy: The Tax Burden and Tax Evasion in New Zealand," Econometrics Working Papers 9904, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
  11. Trandel, Greg & Snow, Arthur, 1999. "Progressive income taxation and the underground economy," Economics Letters, Elsevier, vol. 62(2), pages 217-222, February. [Downloadable!] (restricted)
  12. Giles, David E A, 1997. "Causality between the Measured and Underground Economies in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 63-67, January. [Downloadable!] (restricted)
  13. Bacon, Robert W., 1991. "Rockets and feathers: the asymmetric speed of adjustment of UK retail gasoline prices to cost changes," Energy Economics, Elsevier, vol. 13(3), pages 211-218, July. [Downloadable!] (restricted)
  14. Crane, Steven E & Nourzad, Farrokh, 1987. "On the Treatment of Income Tax Rates in Empirical Analysis of Tax Evasion," Kyklos, Blackwell Publishing, vol. 40(3), pages 338-48.
  15. Cheung, Yin-Wong & Chinn, Menzie David & Tran, Tuan, 1995. "How Sensitive Are Trends to Data Definitions? Results for East Asian and G5 Countries," Applied Economics Letters, Taylor and Francis Journals, vol. 2(1), pages 1-6, January. [Downloadable!] (restricted)
  16. Koskela, Erkki, 1983. "A note on progression, penalty schemes and tax evasion," Journal of Public Economics, Elsevier, vol. 22(1), pages 127-133, October. [Downloadable!] (restricted)
  17. Leybourne, S J & McCabe, B P M, 1994. "A Simple Test for Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 97-103, February.
  18. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
    Other versions:
  19. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
  20. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August. [Downloadable!] (restricted)
  21. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
    Other versions:
  22. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Blackwell Publishing, vol. 4(3), pages 249-73.
Full references

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. David E. A. Giles & Betty J. Johnson, 2000. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 0006, Department of Economics, University of Victoria. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? Authors can create their own profile with links to their works on the RePEc Author Service.

This page was last updated on 2008-8-27.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.