Recent research on the unobserved economy suggests that the phenomenon has important implications for both macroeconomic policy and public finance. Attention is focused on the public finance implications by examining a macro-model model from which it is possible to derive a family of Laffer curves. The model reveals that the final shape and position of the Laffer curve depends upon the strength of supply side effects, the progressivity of the tax system and the size of the unobserved economy. Using alternative parameterizations of each of these effects, we obtain rough empirical estimates of the Laffer curve for the UK. Reference: Journal of Economic Affairs, Vol. 3, No.1, October, 1982, pp.36-42.
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Paper provided by EconWPA in its series Macroeconomics with number
0502013.
Find related papers by JEL classification: E1 - Macroeconomics and Monetary Economics - - General Aggregative Models E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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