IDEAS home Printed from https://ideas.repec.org/p/use/tkiwps/1004.html
   My bibliography  Save this paper

Revaluating the Tanzi-Model to Estimate the Underground Economy

Author

Listed:
  • J. Ferwerda
  • I. Deleanu
  • B. Unger

Abstract

Since the early 1980s, the interest in the nature and size of the non-measured economy (both the informal and the illegal one) was born among researchers in the US. Since then, several models to estimate the shadow and/or the underground economy appeared in the literature, each with its own theoretical pros and cons. In this paper we show that it is possible to overcome earlier expressed criticism of the Tanzi-model (1983). Its lack of a base year without any underground economy can be overcome, by using the natural experiment of the introduction of the Euro. However, this paper also comes up with new criticism. It shows that the crucial relationship of the Tanzi-model between taxes and the demand for cash money is not time robust, hence the model is not useful for estimating the underground economy nowadays. We believe that the change in financial conditions could partially explain the decline in the relevance of taxes as a means to evaluate the underground economy. We build a revised Tanzi model and try to find variables apart from tax evasion incentives in order to explain the underground economy.

Suggested Citation

  • J. Ferwerda & I. Deleanu & B. Unger, 2010. "Revaluating the Tanzi-Model to Estimate the Underground Economy," Working Papers 10-04, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:1004
    as

    Download full text from publisher

    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/309525/10_04.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:bdi:opques:qef_144_01 is not listed on IDEAS
    2. Guerino Ardizzi & Eleonora Iachini, 2013. "Why are payment habits so heterogeneous across and within countries? Evidence from European countries and Italian regions," Questioni di Economia e Finanza (Occasional Papers) 144, Bank of Italy, Economic Research and International Relations Area.
    3. Guerino Ardizzi & Carmelo Petraglia & Massimiliano Piacenza & Gilberto Turati, 2014. "Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, With an Application to Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 747-772, December.
    4. Guerino Ardizzi & Carmelo Petraglia & Massimiliano Piacenza & Gilberto Turati, 2011. "Measuring the Shadow Economy with the Currency Demand Approach - A Reinterpretation of the methodology, with an application to Italy," Working papers 22, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    5. Hana Zídková, 2012. "Discussion of Methods for Estimating the Shadow Economy," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2012(6), pages 3-17.

    More about this item

    Keywords

    Underground Economy Estimation; Shadow Economy; Tax Evasion;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:1004. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk). General contact details of provider: http://edirc.repec.org/data/eiruunl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.