IDEAS home Printed from https://ideas.repec.org/p/vic/vicewp/9909.html
   My bibliography  Save this paper

A Fuzzy Logic Approach to Modelling the Underground Economy

Author

Listed:
  • Robert Draeseke
  • David E. A. Giles

Abstract

The availability of data for the size of the "Underground Economy" is important for macroeconomic policy. We use fuzzy set theory and fuzzy logic to construct an annual time-series for the (unobservable) New Zealand underground economy over the period 1968 to 1994. Two input variables are used - the effective tax rate and an index of the degree of regulation. The resulting underground economy time-series is compared with one previously constructed by the second author using a structural "Multiple Indicators, Multiple Causes" (MIMIC) model. The two approaches each yield sensible, but somewhat different, pictures of the New Zealand underground economy over this period. The fuzzy logic approach to this measurement problem involves several subjective judgements, but our results are quite robust to these choices.

Suggested Citation

  • Robert Draeseke & David E. A. Giles, 1999. "A Fuzzy Logic Approach to Modelling the Underground Economy," Econometrics Working Papers 9909, Department of Economics, University of Victoria.
    • Handle: RePEc:vic:vicewp:9909
    Note: ISSN 1485-6441
    as

    Download full text from publisher

    File URL: https://www.uvic.ca/socialsciences/economics/_assets/docs/econometrics/ewp9909.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
    2. Rajat Deb & Manabendra Dasgupta, 1996. "Transitivity and fuzzy preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 13(3), pages 305-318.
    3. Lindstrom, Tomas, 1998. "A fuzzy design of the willingness to invest in Sweden," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 1-17, July.
    4. Gregory Richardson, 1998. "The structure of fuzzy preferences: Social choice implications," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(3), pages 359-369.
    5. Patrick J. Caragata, & David E. A. Giles, 1998. "Simulating the Relationship Between the Hidden Economy and the Tax Level and Tax Mix in New Zealand," Econometrics Working Papers 9804, Department of Economics, University of Victoria.
    6. David Giles & Patrick Caragata, 2001. "The learning path of the hidden economy: the tax burden and tax evasion in New Zealand," Applied Economics, Taylor & Francis Journals, vol. 33(14), pages 1857-1867.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. António Caleiro, 2005. "How is Confidence Related to Unemployment in Europe? A fuzzy logic answer," Economics Working Papers 1_2005, University of Évora, Department of Economics (Portugal).
    2. David E. A. Giles & Robert Draeseke, 2001. "Econometric Modelling based on Pattern recognition via the Fuzzy c-Means Clustering Algorithm," Econometrics Working Papers 0101, Department of Economics, University of Victoria.
    3. António Caleiro, 2003. "Subjective Versus Objective Economic Measures, A fuzzy logic exercise," Economics Working Papers 11_2003, University of Évora, Department of Economics (Portugal).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David E.A. Giles & Gugsa T. Werkneh & Betty J. Johnson, 2001. "Asymmetric Responses of the Underground Economy to Tax Changes: Evidence From New Zealand Data," The Economic Record, The Economic Society of Australia, vol. 77(237), pages 148-159, June.
    2. David Giles & Lindsay Tedds & Gugsa Werkneh, 2002. "The Canadian underground and measured economies: Granger causality results," Applied Economics, Taylor & Francis Journals, vol. 34(18), pages 2347-2352.
    3. David E. A. Giles & Betty J. Johnson, 1999. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 9910, Department of Economics, University of Victoria.
    4. Draeseke, Robert & Giles, David E.A., 2002. "A fuzzy logic approach to modelling the New Zealand underground economy," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 59(1), pages 115-123.
    5. Conal Duddy & Ashley Piggins, 2018. "On some oligarchy results when social preference is fuzzy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 51(4), pages 717-735, December.
    6. Espin, Rafael & Fernandez, Eduardo & Mazcorro, Gustavo & Lecich, Maria Ines, 2007. "A fuzzy approach to cooperative n-person games," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1735-1751, February.
    7. Dario Cziraky & Max Gillman, 2004. "Inflation and Endogenous Growth in Underground Economies," wiiw Balkan Observatory Working Papers 50, The Vienna Institute for International Economic Studies, wiiw.
    8. David Giles & Patrick Caragata, 2001. "The learning path of the hidden economy: the tax burden and tax evasion in New Zealand," Applied Economics, Taylor & Francis Journals, vol. 33(14), pages 1857-1867.
    9. Yu, Tiffany Hui-Kuang & Wang, David Han-Min & Chen, Su-Jane, 2006. "A fuzzy logic approach to modeling the underground economy in Taiwan," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 362(2), pages 471-479.
    10. Chaudhuri, Kausik & Schneider, Friedrich & Chattopadhyay, Sumana, 2006. "The size and development of the shadow economy: An empirical investigation from states of India," Journal of Development Economics, Elsevier, vol. 80(2), pages 428-443, August.
    11. Perote-Pena, Juan & Piggins, Ashley, 2007. "Strategy-proof fuzzy aggregation rules," Journal of Mathematical Economics, Elsevier, vol. 43(5), pages 564-580, June.
    12. Lindsay M. Tedds & David E. A. Giles, 2000. "Modelling the Underground Economies in Canada and New Zealand: A Comparative Analysis," Econometrics Working Papers 0003, Department of Economics, University of Victoria.
    13. Dinko Dimitrov, 2001. "Fuzzy Preferences, Liberalism and Non-discrimination," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 63-76.
    14. Kausik Chaudhuri & Friedrich Schneider, 2011. "The Size and Development of the Shadow Economy in India: A First Attempt at a Public Choice Explanation," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 3, Edward Elgar Publishing.
    15. David E. A. Giles & Robert Draeseke, 2001. "Econometric Modelling based on Pattern recognition via the Fuzzy c-Means Clustering Algorithm," Econometrics Working Papers 0101, Department of Economics, University of Victoria.
    16. Hannu Nurmi, 2001. "Resolving Group Choice Paradoxes Using Probabilistic and Fuzzy Concepts," Group Decision and Negotiation, Springer, vol. 10(2), pages 177-199, March.
    17. Piggins, Ashley & Duddy, Conal, 2016. "Oligarchy and soft incompleteness," MPRA Paper 72392, University Library of Munich, Germany.
    18. Roberto Dell'Anno & Adalgiso Amendola, 2008. "Istituzioni, Diseguaglianza ed Economia Sommersa: quale relazione?," Quaderni DSEMS 24-2008, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    19. repec:ces:ifodic:v:14:y:2017:i:4:p:19267788 is not listed on IDEAS
    20. Gemmell, Norman & Hasseldine, John, 2012. "The Tax Gap: A Methodological Review," Working Paper Series 18717, Victoria University of Wellington, Chair in Public Finance.
    21. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.

    More about this item

    Keywords

    underground economy; tax evasion; fuzzy logic; fuzzy sets;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • H1 - Public Economics - - Structure and Scope of Government
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

    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:vic:vicewp:9909. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kali Moon (email available below). General contact details of provider: https://edirc.repec.org/data/devicca.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.