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Shadow economy and its relations with tax system and state budget in Poland 1995 - 2007

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  • Stanisław Cichocki

    ()
    (Faculty of Economic Sciences, University of Warsaw)

Abstract

In this paper, results of the research on measurement of shadow economy in Poland in the period 1995 - 2007 are presented. This research is motivated by controversial existing estimates. First, some definitions of shadow economy are reviewed. Then, on the basis of monetary methods, an econometric model for currency demand is built. Using estimation results, the size of shadow economy is assessed. According to these estimates shadow economy declined in the period 1995 – 2007 starting from 40% of GDP in 1995 and reaching about 10% of GDP in 2007. The paper also analyses relations between shadow economy, state budget and tax system. Measures for these relations are discussed and a Vector Autoregressive model is estimated. Impulse Reaction Functions are drawn, showing that an increase in indirect tax burden enlarges shadow economy. A contrary effect arises due to an increase in a) direct tax burden, b) budget balance.

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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP5.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2008-05.

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Length: 23 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:war:wpaper:2008-05

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Related research

Keywords: shadow economy; tax system; state budget; currency method; VAR;

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References

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  1. Isilda Shima, 2005. "The Shadow Economy in NorwayDemand for Currency Approach," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 61 - 78, February.
  2. Friedrich Schneider, 2005. "Shadow Economies of 145 Countries all over the World: What Do We Really Know?," CREMA Working Paper Series 2005-13, Center for Research in Economics, Management and the Arts (CREMA).
  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. Jan Hanousek & Filip Palda, 2004. "Mission Implausible III: Measuring the Informal Sector in a Transition Economy using Macro Methods1," William Davidson Institute Working Papers Series 2004-683, William Davidson Institute at the University of Michigan.
  5. Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
  6. 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.
  7. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
  8. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, October.
  9. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
  10. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
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Cited by:
  1. Vjekoslav Klaric, 2011. "Estimating the size of non-observed economy in Croatia using the MIMIC approach," Financial Theory and Practice, Institute of Public Finance, vol. 35(1), pages 59-90.

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