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The shadow economy in Norway: Demand for currency approach

Author

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  • Shima, Isilda

    (Ragnar Frisch Centre for Economic Research)

Abstract

The main purpose of this study is to measure the level of the shadow economy in Norway following the demand for currency approach. The question analysed is how well does this approach capture the level of shadow economy in front of a decreasing level of currency in circulation and an increasing use of electronic payment system. In this study is found a decreasing level of the shadow economy in Norway since mid 1990s starting with 8,8 percent of the shadow economy relative to GDP in 1991, up to 10.2 percent in 1995 and there after declining to a level of 5.6 percent of GDP in 2002. The explanation for the decline of the level of shadow economy relative to GDP could be the fact of a decreasing demand for currency for transaction going along with an increase of electronic payments instruments. Also, in Norway, a broad tax reform was implemented in 1992 with the purpose of reducing tax-induced distortions by lowering the tax rates and broadening the tax base. One of the main causes of the shadow economy, is considered to be the burden of direct and indirect tax to the individuals, but the complexity of the tax system is also an important factor that may have an impact on the level of shadow economy.

Suggested Citation

  • Shima, Isilda, 2004. "The shadow economy in Norway: Demand for currency approach," Memorandum 10/2004, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2004_010
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-10-2004.pdf
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    References listed on IDEAS

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    Cited by:

    1. Stanisław Cichocki, 2008. "Shadow economy and its relations with tax system and state budget in Poland 1995 - 2007," Working Papers 2008-05, Faculty of Economic Sciences, University of Warsaw.
    2. Macias, Jose Brambila & Cazzavillan, Guido, 2009. "The dynamics of parallel economies. Measuring the informal sector in Mexico," Research in Economics, Elsevier, vol. 63(3), pages 189-199, September.
    3. Stanisław Cichocki, 2009. "Shadow Economy and Its Relations with Tax System and State Budget in Poland," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 24.
    4. Isilda Mara & Edlira Narazani, 2011. "The Effects of Flat Tax on Inequality and Informal Employment: The Case of Albania," wiiw Balkan Observatory Working Papers 94, The Vienna Institute for International Economic Studies, wiiw.

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    More about this item

    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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