The nonobserved economy in the European Union

To better understand the share of the nonobserved economy (NOE) in the European Union, especially on the PIIGS, we estimate, through the multiple indicators multiple causes model, the path between 1980 and 2013. The model includes (i) the tax burden (disaggregated into direct and indirect taxes), a proxy of regulation burden, the unemployment rate and self-employment as causes of the NOE economy; (ii) the GDP and the labour force participation ratio as indicators of the NOE economy. In particular, the estimated weight of NOE as a percentage of official GDP was always higher in the PIIGS group.     

Measuring the size of the shadow economy in 30 provinces of China over 1995–2016: The MIMIC approach

Applying the multiple indicators and multiple causes (MIMIC) approach, the present paper measured the size of the shadow economies in China's provinces over 1995–2016. The results show that the average size of the shadow economy in 30 provinces of China increased from 13.55% in 1995 to 14.39% in 2009, and then decreased to 12.30% in 2016. There are obvious variations in the size of the shadow economies in different districts of China. The average size of the shadow economy is lowest in provinces in the eastern district and highest in the western district. In addition, the causes and consequences of the shadow economies in China's provinces have also been analysed using the MIMIC approach, and the results show that tax burden, complexity of the tax system, intensity of regulation, unemployment, employment in the agricultural sector and economic openness have significant positive effects on China's shadow economy, while the ratio of direct taxes to indirect taxes, fiscal autonomy and income levels have significant negative effects on China's shadow economy. Using the growth rate of energy consumption as the benchmark indicator, the MIMIC analysis shows that the shadow economy has significant positive effects on the development of the official economy and income inequality while having a significant negative effect on the labour participation rate.     

Comparative fiscal illusion: a fiscal illusion index for the European Union

This paper provides an empirical analysis of fiscal illusion by estimating an index of fiscal illusion for 28 European countries over the period 1995–2008 employing a structural equation approach. Using Multiple Indicators Multiple Causes models, the paper investigates the main indicators of fiscal illusion and develops an index of fiscal illusion. It concludes that the chief determinants for the deployment of fiscal illusion strategies are the share of self-employment on total employment, the educational level of citizens, and the size of tax burden. At the same time, policy makers attempt to ‘conceal’ the real tax burden by means of debt illusion, fiscal drag, wage withholding taxes, as well as taxes on labour.     

Estimating the size of the shadow economy in Spain: a structural model with latent variables

There has recently been a revival of international interest in measuring the size of the shadow economy. The current study adopts an approach to the Spanish case that is based on the theory of unobservable variables. This methodology involves the estimation of structural models (MIMIC) which analyses a set of causes of the shadow economy while simultaneously taking into account its influence upon a series of indicators. The proposed model permits the determination of a relative evolution over time of the size of the shadow economy, which requires the calibration of the model with an exogenous estimation in order to obtain real values. The exogenous estimation employed is that obtained by a monetary method based on a money demand function. The results show a considerable shadow economy, measuring between 8 and 18.8% of GDP in the period 1976–2002, and demonstrate that the shadow economy is significantly influenced by the tax burden, the degree of regulation and unit labour costs. A positive correlation is obtained between GDP, money demand and the level of the shadow economy.     

The growth effects of tax rates in the OECD

This paper explores the merits of macro‐ and micro‐based tax rate measures within an open economy “fiscal policy and growth” model. Using annual data for 15 OECD countries we find statistically small, non‐robust long‐run growth effects of macro‐based average tax rates on capital income and consumption, but some evidence for average labour income tax effects. Changes in “micro” marginal income tax rates at both the personal and corporate levels yield statistically robust GDP responses of modest size. Both domestic and foreign corporate taxes appear relevant. In general, tax effects on GDP operate largely via factor productivity rather than factor accumulation.     

The Impact of the Shadow Economy on Indirect Tax Revenues

This paper examines empirically the impact of the shadow economy on indirect tax revenues in an unbalanced panel of 125 countries for the period 1990–2011. The same analysis is conducted excluding at first and then including international trade tax revenues in (total) indirect tax revenues, as a way to disentangle any impact of trade liberalization. In both cases, the results suggest that the size of the shadow economy increases the ratio of indirect tax revenues to GDP, as long as informality does not exceed a cutoff value. When the size of the shadow economy exceeds that level, any further increase affects indirect taxation negatively. The findings are robust to a number of sensitivity tests and when addressing the problem of potential endogeneity. The empirical evidence is in line with the predictions provided by the theoretical framework of the paper.     

Migration,social security,and economic growth

This paper studies the effect of population aging and international migration on economic performance. Fertility is endogenized so that immigrants and natives can have different fertility rates, which provides a more realistic view of policy effects. Fertility is an important determinant to the tax burden of social security since it affects the quantity and quality of future tax payers. We find that introducing immigrants into the economy can reduce the tax burden of social security. If the survival probability of young agents to old age (or the replacement ratio) is high enough, the growth rate of GDP per worker for an economy with international migration will be higher than for a closed economy. Regarding migration policies, our numerical results indicate that economic growth rate of GDP per worker will first decrease then increase as the flow of immigrants increases. Attracting more skilled immigrants will enhance economic growth.     

PRIVATE INTERGENERATIONAL TRANSFERS AND THEIR ABILITY TO OFFSET THE FISCAL BURDEN OF AGEING

The ratio of retirees to workers in developed countries is expected to increase sharply in the next few decades. In the presence of unfunded income support policies, this increase in old age dependency is expected to increase the future fiscal burden of ageing, which is seen as a threat to living standards. Private intergenerational transfers in the form of bequests are also expected to increase in ageing societies, which may offset the adverse effects of the fiscal burden of population ageing on future living standards. This paper quantifies the ability of these private intergenerational transfers to offset the future fiscal burden of ageing in Australia. This is done through developing a dynamic overlapping generations simulation model with realistic demographics. Calculations based on steady-state simulations (with a pay-as-you-go tax rate equal to 3.3% of GDP) suggest that a bequest to GDP ratio of 1% offsets approximately one-third of the fiscal burden over the lifecycle when measured as a proportion of simple labour income and one-eleventh of the fiscal burden when measured as a proportion of full income (labour income plus leisure). The model is calibrated for Australia under a small open economy assumption such that the optimal solution mimics important cross-sectional and time-series fundamentals of the Australian economy. For the non-steady-state, intergenerational accounting suggests that the empirically plausible intergenerational transfers are strong enough to offset most of the tax burden (80–90%) when measured as a percentage of simple labour income and up to one-quarter of the burden when fiscal burden is measured as a percentage of full income.     

Measuring the size and dynamics of U.S. state-level shadow economies using a dynamic general equilibrium model with trends

We use a two-sector dynamic deterministic general equilibrium model that specifically accounts for trends among time-series variables to estimate the size of the shadow economy for the 50 U.S. states from 1999 to 2019, following Solis-Garcia and Xie (2018, 2022). This paper improves on existing measures of the state-level shadow economy (such as the multiple indicators, multiple causes (MIMIC) methodology by Wiseman (2013a)). In particular, this new measure is based on theoretical foundations, extends the previous measure to include the Great Recession, includes dollar value estimates of the shadow economy, and produces considerably more variation over time and across states. Furthermore, we explore determinants of this new shadow economy measure using a panel vector autoregressive model and find that, on average, states with higher levels of economic freedom, lower regulatory barriers, and larger real GDP have smaller shadow economies. States with bigger governments, on average, have larger shadow economies, and the effect of corruption on shadow economic activity is non-linear, with a positive initial and subsequent negative impact.     

财政分权框架下的财政政策和货币政策

本文扩展了Barro( 1 990 )和Gong和Zou( 2 0 0 2 )的模型 ,讨论财政分权框架下的政府财政政策和货币政策 ,通过消费者行为、地方政府行为和中央政府行为之间Nash均衡解 ,得到了经济增长率和各参数的隐式关系 ,并且通过数值模拟得到经济增长率与各种税收以及政府间转移支付的关系。我们发现经济增长率和收入税的关系是Laffer曲线 ,消费税对经济增长的影响是正的 ,财产税对经济增长的影响是负的。至于货币政策的影响 ,我们发现货币不再是超中性的了 ,供应量增加可以促进经济增长 ,而且经济中的货币的流通程度越高 ,经济增长率越高。最后 ,本文还讨论了多级地方政府的情况 ,分析了不同税收制度的地区对整个经济增长的不同影响。     

Taxing the Financially Integrated Multinational Firm

This paper develops a theoretical model of corporate taxation in the presence of financially integrated multinational firms. Under the assumption that multinational firms use some measure of internal loans to finance foreign investment, we find that the optimal corporate tax rate is positive from the perspective of a small, open economy. This finding contrasts the standard result that the optimal‐source‐based capital tax is zero. Intuitively, when multinational firms finance investment in one country with loans from affiliates in another country, the burden of the corporate taxes levied in the latter country partly falls on investment and thus workers in the former country. This tax exporting mechanism introduces a scope for corporate taxes, which is not present in standard models of international taxation. Accounting for the internal capital markets of multinational firms thus helps resolve the tension between standard theory predicting zero capital taxes and the casual observation that countries tend to employ corporate taxes at fairly high rates.     

Imperfect Capital Mobility and Local Government Behaviour in a Two‐Period Economy

One clear result in the tax competition literature is that, when head taxes on immobile residents are available, the optimal capital tax rate for local government is zero. However, zero tax rate, when resident taxes are available, is incompatible with the phenomenon actually observed. In most countries, local governments use capital taxes as policy variables for choosing a nonzero tax rate. This paper presents a model of a two‐period economy with imperfect mobile capital to explain the behaviour of local government providing capital subsidies on capital. It further examines an equilibrium tax rate where local government’s objectives include Niskanen‐type revenue‐maximizing.     

The development of the shadow economies for Denmark,Norway, and Sweden: A comparison

By applying the currency demand approach, it is tried to provide some insights about the size and the development of the shadow economies in Denmark, Norway and Sweden. Special emphasis is laid on the role of one cause variable - the marginal tax rate - which is assumed to be strongly associated with the size of the shadow economy. In each of the three Scandinavian countries the demand for currency is influenced in a statistically, highly significant way by the marginal tax rate. The difference in demand for currency is then calculated when the actual tax burden over time is compared to the lowest tax burden over the estimation period 1954 to 1982. Assuming the same velocity of money in the shadow and official economy, the shadow grows from 0% in 1954 to 7% for Denmark, to 8% for Norway and to 10% for Sweden up to 1975. From 1976–1982 it fluctuates between 7–8% for Denmark, between 8–10% for Norway and between 11–13% for Sweden. From 1967 on, Sweden has the largest shadow economy followed by Norway and then by Denmark.     

Asymmetric Responses of the Underground Economy to Tax Changes: Evidence From New Zealand Data

This paper considers the relationship between taxes and the size of the New Zealand underground economy. Previous studies indicate that a positive relationship exists in this and certain other countries. This paper addresses the question: 'Is the response of the underground economy to an increase in taxes the same as its response to a decrease in taxes?' We find that although the effect on the underground economy of an upward movement in the effective tax rate is numerically greater than that of a downward tax movement, this difference is not statistically significant.     

促进区域经济协调发展的税收对策

我国区域经济差距过大的税收政策存在税率相同而实际税负不一,税种设计、税收政策不合理,应利用税收政策刺激企业投资,实行差别税率,调整主要税种和完善税收优惠政策。     

Strategic Environmental Policies when Waste Products are Tradable

The paper deals with international trade in hazardous waste products when there is an international oligopoly market for waste, and both waste‐importing and waste‐exporting countries act strategically to utilize national environmental policies to attach rents arising from trade in waste. The authors model a multiple‐stage game where waste is generated in an industrialized country as a byproduct of production, and potentially is exported to some less‐developed countries, if not abated locally, or imposed on local residents at a cost of an environmental tax. In the market for waste, an oligopolistic supply is assumed. The demand for waste is perfectly competitive, with waste‐processing firms guided by marginal disposal costs and environmental taxes levied by foreign countries. With each country playing Nash, the analysis finds domestic and foreign taxes to be distorted from the Pigouvian taxes in such a way that the domestic (waste‐exporter) tax rate is set below, and the foreign tax rate is set above, the Pigouvian taxes. However, a global welfare optimum requires tax distortions in the opposite direction, in the sense that foreign environmental taxes must be set below the Pigouvian tax rate.     

The incidence of heterogeneous residential property taxes

In an economy with multiple tax jurisdictions, the distribution of the burden of heterogeneous residential property taxes is shown to depend on the elasticity of demand for housing, the elasticity of substitution between land and capital in housing production, the elasticity of supply of land to individual tax jurisdictions, and the degree of population mobility between tax jurisdictions. It is demonstrated that the excise effects of the residential property tax may not cancel across jurisdictions and the average rate of tax may overstate or understate the burden on residential capital.     

Tax enforcement,tax compliance and tax morale in transition economies: A theoretical model

The focus of this paper is the analysis of the relationship between tax enforcement, tax compliance and tax morale within countries characterised by rapid introduction of market institutions and slow evolution of political regimes, such as transition economies. The paper investigates a coordination game in which the government is ex-ante committed to tax enforcement and can observe the proportion of tax-compliant agents in the economy. In turn, two groups of agents (third-party reporting and self-reported income) are keen to evade taxes unlawfully but have limited information on how many others evade taxes; their tax morale is therefore an endogenous function of agents' perception on tax compliance. The model predicts that the lower the quality of political institutions and the weaker tax morale, the less tax compliance can be achieved. The third-party reporting group will also be bearing higher tax burden than the self-reported income group. The model entails that having political institutions of good quality is not a sufficient condition to conduce to tax enforcement or tax compliance. Due to the endogenous role of tax morale, the government could be pushed ex-post towards poor or no tax enforcement. If good political institutions are not accompanied by good information about the enforcement of tax collection, there is scope for co-existence of poor tax enforcement, low tax compliance and weak tax morale. As such, this model well describes the tax evasion behaviour observed since the outset of transition from planned to market economy.     

The case for international tax co-ordination reconsidered

In a world of high capital mobility, governments may be tempted to undercut each other's capital income taxes to attract capital from abroad. Since such tax competition may have detrimental effects for all countries, European policy makers have debated the introduction of a minimum capital income tax rate within the EU. This paper develops an applied general equilibrium model to estimate the effects of such tax co-ordination on resource allocation, income distribution and social welfare. The model allows for the concern of policy makers that a rise in capital taxes within the EU may cause a capital flight out of Europe. Capital flight will indeed reduce the welfare gain from tax co-ordination within Western Europe, but a positive net gain will remain, although it is likely to be well below 1% of GDP. The gain from co-ordination will be unevenly distributed across European countries, due to differences in economic structures and in the social preference for redistribution. Moreover, even if the median voter's gain from tax co-ordination may be small, the gains for the poorer sections of society may be quite large.     

US shadow economies: a state-level study

Recent studies of shadow economies focus primarily on cross-country comparisons. Few have examined regional or state-level variations in underground economic activity. This paper presents estimates of the shadow economy for 50 US states over the period 1997–2008. Results suggest that tax and social welfare burdens, labor market regulations, and intensity of regulation enforcement are important determinants of the underground economy. Among the states, Delaware, on average, maintains the smallest shadow economy at 7.28 % of GDP; Oregon, on average, has the second smallest shadow economy at 7.41 % of GDP; followed by Colorado, averaging 7.52 % of GDP, rounding out the three smallest shadow economies in the US West Virginia and Mississippi, on average, have the largest shadow economies in the US as a percent of GDP (9.32 and 9.54 %, respectively).