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Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio

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  • Ercolani, Marco G.

Abstract

Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result.

Suggested Citation

  • Ercolani, Marco G., 2007. "Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-32.
  • Handle: RePEc:zbw:ifweej:5741
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2007-6
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    File URL: https://www.econstor.eu/bitstream/10419/18004/1/economics_2007-6.pdf
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    References listed on IDEAS

    as
    1. Edgar L. Feige & Ivica Urban, 2003. "Estimating the Size and Growth of Unrecorded Economic Activity in Transition Countries: A Re-evaluation of Electric Consumption Method Estimates and their Implications," Macroeconomics 0311010, EconWPA.
    2. Michael Alexeev & William Pyle, 2001. "A Note on Measuring the Unofficial Economy in the Former Soviet Republics," William Davidson Institute Working Papers Series 436, William Davidson Institute at the University of Michigan.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    inflation tax; hidden/shadow/underground economy; seigniorage;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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