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A Re-Examination of the 'Underground Economy' in the United States; A Comment on Tanzi

Author

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  • Edgar L. Feige

    (University of Wisconsin-Madison)

Abstract

This paper examines alternative specifications of a general currency ratio (GCR)model used to obtain macroeconomic estimates of the size and growth of the 'underground economy'. Tanzi's approach to estimating the underground economy is shown to be a variation of the GCR model. However both his conceptual specification and his empirical implementation of the model are shown to flawed, leading to significant underestimation of the size and growth of unreported income in the US economy. The paper appears in the International Monetary Fund Staff Papers, Vol. 33 No. 4 December, 1986

Suggested Citation

  • Edgar L. Feige, 2005. "A Re-Examination of the 'Underground Economy' in the United States; A Comment on Tanzi," Macroeconomics 0501021, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0501021
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    Keywords

    Underground economy; unreported income; currency demand; tax evasion.;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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