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The Underground Economy: Minimizing the Size of Government

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Abstract

This paper duscusses the author's work on measuring and modelling the New Zealand underground economy, 1968-1994. Particular attention is paid to the relationship between this activity and taxation policy. An optimal level for the effective tax rate is reported, in terms of maximizing the impact on the underground economy. The implications for the "tax gap" in that country are examined, and some possible implications for Canada are drawn by combining these results with those of other authors for the latter country.

Suggested Citation

  • David E. A. Giles, 1998. "The Underground Economy: Minimizing the Size of Government," Econometrics Working Papers 9808, Department of Economics, University of Victoria.
    • Handle: RePEc:vic:vicewp:9808
    Note: ISSN 1485-6441. This paper was presented at the Fraser Institute Conference on "How to Spend the Fiscal Dividend : What is the Optimal Size of Government?", Ottawa, December, 1997.
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    Cited by:

    1. Roberto Dell’Anno & Miguel Gómez-Antonio & Angel Alañon-Pardo, 2007. "The shadow economy in three Mediterranean countries: France, Spain and Greece. A MIMIC approach," Empirical Economics, Springer, vol. 33(1), pages 197-197, July.
    2. Dell’Anno, Roberto & Davidescu, Adriana AnaMaria, 2019. "Estimating shadow economy and tax evasion in Romania. A comparison by different estimation approaches," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 130-149.
    3. Paraskevi Koufopoulou & Colin C. Williams & Athanassios Vozikis & Kyriakos Souliotis & Antonios Samprakos, 2021. "Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(3-4), pages 23-47, July-Dece.
    4. Andreas Buehn & Friedrich Schneider, 2012. "Corruption and the shadow economy: like oil and vinegar, like water and fire?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 172-194, February.
    5. Buehn, Andreas & Schneider, Friedrich, 2009. "Corruption and the Shadow Economy: A Structural Equation Model Approach," IZA Discussion Papers 4182, Institute of Labor Economics (IZA).
    6. Roudari, Soheil & Tehranchian, Amirmansour, 2020. "نقش اقتصاد غیررسمی بر کارآفرینی با تاکید بر شاخص کیفیت نهادی [The role of Informal Economy on Entrepreneurship with Emphasis on Institutional Quality Index]," MPRA Paper 127022, University Library of Munich, Germany, revised 21 Oct 2020.
    7. Tehranchian, Amirmansour & Roudari, Soheil & Hedayati, Hosein & Bahrami, Hedayat, 2021. "بررسی تاثیر نوسانات نرخ ارز بر میزان قاچاق کالا در کشور در شرایط تحریم [Investigating the Effect of Exchange rate Fluctuations on the Smuggling rate of Goods in the Country under Sanctions Situations]," MPRA Paper 127010, University Library of Munich, Germany, revised 07 Sep 2021.
    8. Bame-Aldred, Charles W. & Cullen, John B. & Martin, Kelly D. & Parboteeah, K. Praveen, 2013. "National culture and firm-level tax evasion," Journal of Business Research, Elsevier, vol. 66(3), pages 390-396.
    9. Mahieddine Adnan Ghecham, 2017. "The Impact of Informal Sector on Income Distribution: Could Concentration of Income be Explained by the Size of Informal Sector?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 594-600.
    10. Soheila Kaghazian & Isa Zaghi Jojadeh & Yazdan Naghdi, 2015. "Underground Economy Estimation in Iran by Mimic Method," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 90-109.

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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