estimation of production technology when the objective is to maximize return to the outlay abstract this paper deals with estimation of production technology where endogeneous choice of input and output variables is explicitly recognized to address this endogeneity issue we assume that producers maximize return to the outlay we start from a flexible translog transformation function with a single output and multiple inputs and show how the first order conditions of maximizing return to the outlay can be used to come up with an estimating equation that does not suffer from the econometric endogeneity problem although the output and input variables are chosen endogenously this is because the regressors in this estimating equation are in ratio forms which are uncorrelated with the error term under the assumption that producers maximize return to the outlay the analysis is then extended to the multiple outputs and multiple inputs case with technical inefficiency although the estimating equations in both single and multiple output cases are neither production nor distance functions they can be estimated in a straightforward manner using the standard stochastic frontier technique without worrying about endogeneity of the regressors thus we provide a rationale for estimating the technology parameters consistently using an econometric model which requires data on only input and output quantities

interpreting an error correction model partial adjustment forward looking behaviour and dynamic international money demand an error correction model is derived from a stochastic dynamic programming problem incorporating rational expectations a parametric restriction is derived that allows a test for the theoretical proposition that the optimal strategy behind the error correction from entails the failure to asymptotically close the gap between the choice variable and the growing target this is accomplished by nesting a partial adjustment model with forward looking expectations within the error correction paradigm the counterintuitive behaviour embodied in the error correction model is not supported by the data in the context of a cross country comparison of cash balances relationships

price dynamics in the belarusian black market for foreign exchange using unique data from an internet based foreign exchange trading platform we show that the black market efficiently incorporated public information on the state of the belarusian economy during the balance of payments crisis of 2011 between may and october 2011 the government repeatedly devalued the belarusian ruble and eventually abandoned its fixed exchange rate regime measures derived from black market transaction data have significant predictive power for these devaluations the significance of these black market measures survives even when we include standard macroeconomic indicators in our forecasting model in line with standard economic theory activity in the black market has dried up subsequently

the work money does we present independent estimates of the two sides of fisher s identity mv pt exclusive of the financial circulation these show a fair agreement although or because measurement is rough and approximate total transactions are quite stable at 5 5 times national income and thus shed no new light on the transactions demand for money on the money side the overall velocity of circulation rises from 13 in 1950 to 23 in 1978 this is attributed to a strong increase of bank money velocity which by now far exceeds the cash velocity of 16 it may well rise further

the impact of fiscal policy and deregulation on shadow economies in transition countries the case of ukraine a model of ukrainian shadow economy moneydemand is estimated that includes newregulatory burden tax complexity andsoft budget constraint variables thismodel is analyzed to determine the causesand dynamics of the ukrainian shadoweconomy and to assess the effectiveness ofstate measures undertaken to reduce itssize the direct tax burden thebroadly defined regulatory burden thecomplexity of the tax system andsoft budget constraints for enterprises are found tobe important causes of unofficial activity the main explanatory factors forthe estimated decline of the shadow economyin recent years are explained and it is argued that theevidence has implications beyond the caseof ukraine

the hidden economy as an unobserved variable abstract the technique of unobserved variables is used to estimate the relative size and development time of the hidden economy of oecd countries the burdens of taxation and regulations and the tax morality turn out to be statistically significant determinants at the end of the scandinavian and benc lux countries are expected to have a relatively large and japan and switzerland a relatively small hidden economy canada and the united states are rank in the middle the size of all hidden sectors is estimated to have increased in the period 1960 1973 relative to officially measured gnp

measuring and decomposing profit inefficiency through the slacks based measure abstract the slacks based measure was introduced by tone 2001 in order to estimate technical efficiency in the input output space by taking into account all sources of technical inefficiency and satisfying at the same time many interesting properties since then the slacks based measure has attracted the interest of numerous researchers and practitioners the slacks based measure has been applied to technical efficiency determination productivity change measurement the analysis of production process performance consisting of networks and so on however so far the slacks based measure has not been directly related to profit inefficiency as a component of the overall economic performance of firms in this note we show how a specific normalized measure of profit inefficiency may be decomposed through the slacks based measure

currency substitution financial innovations and money demand a note this note presents some finnish evidence on the importance of currency substitution and financial innovations for money demand it is also shown that conventional demend for money specifications which do not take these factors into account are clearly misspecified and produced unreasonable results the problem is particularly acute for narrow concepts of money

whither loose change the diminishing demand for small denomination currency while payment card usage has increased dramatically the stock of outstanding currency has not declined as rapidly we analyze changes in cash demand for 13 advanced economies from 1988 to 2003 by separating cash into three denomination categories to disentangle its store of wealth and payment functions defining denominations commonly dispensed by automated teller machines atms as the medium category we show that demand for small denomination currency decreases with greater debit card usage and with greater retail market consolidation in contrast the demand for high denomination notes decreases when interest rates rise but is generally unaffected by changes in debit card usage

a general proposition on the design of a neutral business tax abstract a simple and general means of levying a business tax that is neutral in the sense that it does not affect the firm s decisions at the margin is discussed in particular we analyze the effect of a business tax of our design on the investment decision of the firm the well known imputed income and immediate write off methods of levying a neutral business tax are found to be special cases of our general tax design the implication of our results is that a neutral pure profits tax can be levied without the informational difficulties of the imputed income method or the cash flow disadvantages of the immediate write off method

blessing or curse foreign and underground demand for euro notes public finance solutions to the european unemployment problem developing countries may hold as much as 25 30 of the 1 3 trillion oecd currency supply although dollar holdings appear to exceed dm holdings by a factor of four the advent of the euro may change this balance indeed by issuing large denomination notes of 100 200 and 500 the european central bank appears to be well poised to challenge the dominance of the ubiquitous us 100 note however large denomination notes are also extremely popular in the oecd underground economy which appears to hold at least 50 of the currency supply as a result the seigniorage revenues obtained by issuing large denomination notes may be an accounting illusion substantially or fully offset by losses due to increased tax evasion hence the new european central bank may wish to consider policies that discourage underground use of currency even at the expense of losing out on foreign demand kenneth rogoff

unemployment and international shadow economy gender differences abstractadding to the body of research on cross country determinants of the informal economy this article studies how unemployment differences across gender drive the propensities to work in the informal sector results accounting for possible simultaneity between unemployment and the shadow economy show that unemployed males rather than unemployed females were more likely to operate underground these findings about greater male propensities are generally robust to alternative considerations

generating efficiency economic and environmental regulation of public and private electricity generators in spain abstract economic regulation of firms with market power has placed increasing emphasis on incentive based regulation such as price caps we focus on the effect of regulation as distinct from ownership and identify the effect of two different regulatory schemes on both publicly and privately owned spanish electricity generators publicly owned generators were more efficient under cost of service regulation private but not public firms responded to incentive regulation by increasing efficiency bringing their productivity to similar levels we introduce some novelty in modelling efficiency including three pollutants and declared plant availability as outputs and we test for the effect of environmental regulation in reducing pollutants

budget deficits corporate income taxes and the current account this paper studies the effects of budget deficits financed by taxing corporate incomes as households are finitely lived transfers and taxes on personal incomes are discounted at a higher rate than the interest on government debt as corporations are infinitely lived taxes on corporations are discounted at the same rate as the interest on government debt thus unanticipated deficits financed by taxing corporate incomes are neutral anticipated deficits financed by taxing corporations cause a current account surplus as transfers are then discounted at a higher rate than the taxes shifting taxes from households to corporations causes a current account surplus copyright 1995 by ohio state university press

eco efficiency assessment of eu manufacturing sectors combining input output tables and data envelopment analysis following production and consumption based accounting approaches abstract assessing the footprint of anthropogenic activities has become particularly challenging in today s globalized markets where a large number of economic transactions taking place across the globe need to be disentangled before the most critical sectors are identified in this work we present an approach to quantify the eco efficiency of economic activities that combines multi regional environmentally extended input output tables and data envelopment analysis we employ this method to assess the european union manufacturing sectors in terms of three inputs global warming potential potential acidifying equivalent and tropospheric ozone forming potential and one output economic wealth following both production and consumption based accounting approaches our approach classifies economic sectors as efficient and inefficient and for the latter it provides improvement targets that if attained would make them efficient we find that there is a significant mismatch at the sectorial level between both accounting schemes each providing complementary information for policy making in the production based case targets allow identifying sectors and pollutants requiring more stringent regulations and or higher investments in cleaner technologies conversely the consumption based accounting allows identifying the ultimate sources of impact an insight that can assist in the selection of alternative cleaner suppliers via eco labelling of products services and proper taxation schemes

hyperbolic efficiency and return to the dollar abstract this paper after establishing the relations between hyperbolic graph measure of technical efficiency and the radial measures of technical efficiency shows that the dual cost and revenue interpretation of the hyperbolic efficiency measure is related to georgescu roegen s notion of return to the dollar n georgescu roegen in koopmans t ed activity analysis of production and allocation wiley new york 1951 pp 98 115 once this relation is established it leads to a derivation of an allocative efficiency index which measures the price distortions using data on observed costs and revenues without requiring information on prices

network effects on cash card substitution in transactions and low interest rate regimes we develop a nash game on the adoption of a new eftpos electronic fund transfer at point of sale card payment media given cash is dispensed by a competitive atm automated teller machine network equilibrium conditions when cash and card use coexist entail a specific relationship between the card network coverage parameter super k and the proportion of cash financed expenditures we derive a payments innovation technology constrained transactions demand for money which is highly interest rate sensitive in low interest rate regimes data on cash card use in the uk 1990 97 is used to calibrate the model

a kuznets curve in environmental efficiency an application on oecd countries the role of the environment is an important issue in policy making andthe accurate assessment of the environmental conditions is vital inthis paper using nonparametric techniques an environmental efficiencyindex is developed for each of the oecd countries these indexes allowone both to do cross section comparisons on the state of each country sproduction process in its treatment of undesirable outputs and also totrace each country s modification of their production processesovertime furthermore in this study we investigate the factorsunderlying societies environmental concerns that eventually lead tochanges in the environmental efficiency the results provide furtherempirical evidence for the environmental kuznets curve hypothesis

toward a theory of international currency we use the framework of random matching games and develop a two country model of the world economy in which two national currencies compete and may be circulated as media of exchange there are multiple equilibria which differ in the areas of circulation of the two currencies in one equilibrium the two national currencies are circulated only locally in another one currency is circulated as an international currency there is also an equilibrium in which both currencies are accepted internationally we also find an equilibrium in which the two currencies are directly exchanged we first characterize the existence conditions of these equilibria in terms of the relative country size and the degree of economic integration and then use an evolutionary approach to equilibrium selection to explain the evolution of the international currency as the two economies become more integrated some welfare implications are also discussed for example a country can improve its national welfare by letting its own currency circulate internationally provided the domestic circulation is controlled for when the total supply is fixed however a resulting currency shortage may reduce the national welfare

the case of the missing currency in late 1992 currency in the hands of the public was close to 300 billion representing nearly 30 percent of m1 one would think that an economic variable of this magnitude would be well analyzed and well understood quite the contrary the last serious surveys of currency holdings commissioned by the federal reserve were in 1984 and 1986 these surveys indicate that currency demand is not at all understood probably the most intriguing and newsworthy result of these surveys was that about 80 percent of currency holdings simply could not be explained despite the stir of general interest that followed those studies economists have shown little lasting interest in considering the implications of these findings this paper is written in hopes of stimulating more interest in currency behavior

corruption and the shadow economy an empirical analysis this paper analyzes the influence of the shadow economy on corruption and vice versa we hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries the hypotheses are tested for a cross section of 98 countries our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions based indices of corruption are used employing an index of corruption based on a structural model however corruption and the shadow economy are complements in countries with low income but not in high income countries

smuggling around the world evidence from a structural equation model this article uses a multiple indicators multiple causes mimic model to analyse the determinants of smuggling the analysis reveals that higher corruption and a lower rule of law encourage smuggling tariffs and trade restrictions are important push factors while a higher black market premium bmp discourages smugglers based on the mimic estimates we calculate an index of smuggling which provides a ranking for 54 countries we find that smuggling is rampant in cameroon pakistan and kenya while it is least prevalent in switzerland finland and sweden

how big is the shadow economy a re analysis of the unobserved variable approach of b s frey and h weck hannemann abstract in a widely quoted study b s frey and h weck hannemann estimated the size and the development of the shadow economy in 17 countries by means of the latent variable approach a re analysis of the data shows that the results of frey and weck hannemann s model are extremely unstable and cannot be regarded as reliable statements about the shadow economy of these 17 countries even minor variations in the number of countries included in the analyses in the period under investigation or in the index which is defined lead to a pronounced instability a critical look at the observational variables used in the model lead to the conclusion that the authors cannot even be sure that what they have investigated is indeed the shadow economy the latent variable could equally well be interpreted in other ways it could be for instance that they have measured the development of the welfare state

multilateral productivity comparisons when some outputs are undesirable a nonparametric approach multilateral productivity comparisons of firms producing multiple outputs some of which are undesirable are obtained by making two modifications to the standard farrell approach to efficiency measurement the restriction that production technology satisfy strong disposability of outputs is relaxed to allow for the fact that undesirable outputs may be freely disposable and the efficiency measures are modified to allow for an asymmetric treatment of desirable and undesirable outputs performance measures that satisfy these requirements are calculated as solutions to programming problems the methodology is applied to a sample of mills producing paper and pollutants

the demand for large bank notes in many countries the high share of the largest bank note denomination in the total currency circulation contrasts sharply with its limited use in payment transfers this somewhat puzzling phenomenon has been discussed more than once for the u s 100 bill which has a value share of nearly 50 percent see anderson 1977 kimball 1981 porter and bayer 1984 however the phenomenon is the more remarkable for countries like switzerland germany and the netherlands that issue a denomination at the upper end of the bank note range whose face value is five to fifteen times as high as the 100 note in the netherlands this is the fl 1 000 note with a face value at end 1990 of more than u s 500 1 the circulation of this fl 1 000 note has grown dramatically see table 1 at year end 1987 fl 1 000 notes accounted for almost 45 percent of the value of bank notes in circulation and this was thus the most important denomination in terms of value at that time there were approximately fifteen million fl 1 000 notes in circulation this works out at an average of one of these notes per head of the population and over 2 5 notes per household compared with less than one note per household just ten years earlier nevertheless fl 1 000 notes are seldom encountered in the course of everyday payment transactions analysis of the development of macroeconomic variables reveals that the remarkable increase in the importance of the fl 1 000 note since 1980 cannot be solely

estimation of input distance functions a system approach this article offers a methodology to address the endogeneity of inputs in the input distance function idf formulation of the production processes we propose to tackle endogenous input ratios appearing in the normalized idf by considering a flexible simultaneous system of the idf and the first order conditions from the firm s cost minimization problem our model can accommodate both technical and input allocative inefficiencies amongst firms we also present the algorithm for quantifying the cost of allocative inefficiency we showcase our cost system based model by applying it to study the production of norwegian dairy farms during the 1991 2008 period among other things we find both an economically and statistically significant improvement in the levels of technical efficiency among dairy farms associated with the 1997 quota scheme change which a more conventional single equation stochastic frontier model appears to be unable to detect

estimating the size of the danish shadow economy using the currency demand approach an attempt the currency demand approach provides some insight into the size and development of the shadow economy in denmark currency demand is statistically affected by tax rates the difference in currency demand is calculated by comparing the actual tax burden over time to the lowest tax burden in the period 1952 82 the shadow economy grew steadily to 10 per cent of gnp in 1977 and then fluctuated between 7 10 per cent of gnp for the period 1978 82 the calculated size fits nicely with the results obtained using the same

unemployment and the underground economy in australia despite government attempts to reduce welfare benefit fraud in australia participation in the underground economy by those claiming to be unemployed continues although there exists considerable international literature on the size of the underground economy academics and public officials alike have paid little attention to the extent of participation in the underground economy by those who claim to be unemployed and in receipt of social security payments this study provides the first known estimate of how changes in the unemployment rate affect the size and growth of the underground economy in australia and the likely economic implications this may have for public policy decisions we find that a number of unemployed australians prefer to remain unemployed and work surreptitiously in the underground economy while others after becoming unemployed and finding legitimate employment prefer to continue working in the underground economy

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

dealing with monetary paralysis at the zero bound recently the key constraint for central banks is the zero lower bound on nominal interest rates central banks fear that if they push short term policy interest rates too deeply negative there will be a massive flight into paper currency this paper asks whether in a world where paper currency is becoming increasingly vestigial outside small transactions at least in the legal tax compliant economy there might be relatively simple ways to finesse the zero bound without affecting how most ordinary people live surprisingly this question gets little attention compared to the massive number of articles that take the zero bound as given and look for out of the box solutions for dealing with it in an inversion of the old joke it is a bit as if the economics literature has insisted on positing assume we don t have a can opener without considering the possibility that we might be able to devise one it makes sense not to wait until the next financial crisis to develop plans fundamentally there is no practical obstacle to paying negative or positive interest rates on electronic currency and as we shall see effective negative rate policy does not require eliminating paper currency

a model selection approach for multiple indicators multiple causes model abstractthis study proposes a model selection approach for determining the inclusion or exclusion of a latent variable when two exogenous and two endogenous variables are provided the models compared are the multivariate regression model without latent variables mr model and the multiple indicators multiple causes model mimic model the inclusion of a latent variable in the mr model yields the mimic model in the proposed approach an information criterion is used to select the best model of the two the efficacy of the proposed approach is examined through two types of simulation studies and empirical analyses of the shadow economy and the fiscal illusion

labor market institutions taxation and the underground economy abstract the paper aims at qualifying the links between labor market institutions taxation tax monitoring and underground economic activity the proposed model is a continuous time matching model with one commodity roduced either overground or underground underground economic activity arises because of partial compliance with regulations and tax contributions imposed by the government vacancies and workers search are directed at a specific labor market workers are heterogenous in the subjective cost they face when operating in the irregular sector analytical and numerical investigations suggest that interactions between regular and irregular activities can affect standard results of policy interventions in that respect the paper supports the view that policies aiming at increasing individuals benefits of participating in the regular sector are more desirable than a deterrence policy

on money as a medium of exchange we analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo nash equilibria in trading strategies are characterized certain goods emerge endogenously as media of exchange or commodity money depending both on their intrinsic properties and on extrinsic beliefs there are also equilibria with genuine fiat currency circulating as the general medium of exchange we find that equilibria are not generally pareto optimal and that introducing fiat currency into a commodity money economy may unambiguously improve welfare velocity acceptability and liquidity are discussed

estimating the second economy in tanzania abstract the official national accounts of tanzania suffer from two serious weaknesses incomplete coverage as well as inaccurate estimates of the activities covered this arises because many of the activities especially those in the informal sector are either misreported or underrecorded often however the required information is deliberately concealed from public authorities either because the agents are involved in illegal black market activities or where such parallel market activities are legal there is a deliberate intention to evade government controls the misstatement and omission of these second economy activities from official statistics imply that macroeconomic measures are not robust enough for meaningful analysis development planning policy and program formulation this paper attempts to estimate the magnitude of and changes in the second economy in tanzania to establish the extent to which official statistics misstate actual production of goods and services

currency demand and the growth of the underground economy in canada 1991 1995 the extent to which the recent introduction of a value added tax in canada contributed to the growth of the underground economy remains controversial if underground economy growth led to increased currency holdings and shifted the currency demand function forecasts for the period after the introduction of the tax should tend to underestimate currency holdings using a cointegration based error correction mechanism in vector autoregression models currency demand is estimated using quarterly data for 1968 1990 and dynamic forecasts are made for 1991 1995 on average currency demand is underpredicted but by a small amount the results are consistent with an increase in the underground economy of between 0 01 and 0 3 of gdp as a result of the new tax if changes in marginal direct tax rates are considered the underground economy may have grown between 0 1 and 0 7 of gdp in 1991 1995

nonparametric analysis of technical and allocative efficiencies in production in this paper we extend varian s 1984 nonparametric production analysis to situations when the set of observed output input and price data is not consistent with profit maximization for at least one firm in such cases varian s results imply that no production possibility set containing all observations can rationalize the observed data we identify each firm whose performance given the prices faced by it may be found consistent with profit maximization relative to some production possibility set containing all observed output input vectors we show that the set 4 of all such firms can itself be weaklv rationalized in the sense that there exists a closed convex and monotone production possibility set that contains all the observations and relative to which the performance of all the firms in the set 8o is consistent with profit maximization given their respective prices by definition firms not included in this largest set d of efficient observations unambiguously deviate from profit maximizing behavior for any production possibility set containing all observations we follow farrell 1957 and analyze these deviations into technical and allocative efficiency measures considering as admissible all closed convex and monotone production possibility sets relative to which the performance of each firm in the set g remains consistent with profit maximization we then describe nonparametric methods for determining the tightest upper and lower bounds on the technical allocative and aggregate efficiency measures evaluated relative to all such admissible production possibility sets it is seen that the tightest upper bound on the technical efficiency measure is the same as the value computed by the nonparametric efficiency evaluation technique known as data envelopment analysis thus establishing a link between this literature in management science operations research and the nonparametric production analysis in economics

time consistent taxation in a dynastic family model with human and physical capital and a balanced government budget this paper analyzes optimal time consistent taxation in a dynastic family model with human and physical capital and with a balanced government budget when tax revenue is used for publicly provided consumption or lump sum transfers leisure would be higher than its social optimum pareto optimal taxation requires taxing capital income more heavily than labour income and subsidizing investment at the same rate of the tax also it requires either subsidizing labour at the same rate as a consumption tax or subsidizing consumption at the same rate as a labour income tax and hence it is not a practical guide to policy further a consumption tax or equivalently a uniform income tax with investment subsidies at the same rate can be improved on by taxing capital income more heavily than labour income ce memoire analyse la fiscalite optimale et consistante dans le temps dans un modele de famille dynastique avec capital humain et physique et un budget gouvernemental equilibre quand le revenu fiscal est utilise pour financer la consommation publique ou pour des transferts forfaitaires le niveau de loisir sera plus eleve que l optimum social la fiscalite optimale paretienne exige qu on taxe le revenu du capital plus fortement que celui du travail et qu on subventionne l investissement au meme taux que la taxe elle exige aussi soit qu on subventionne le travail au meme taux que la taxe a la comsommation soit qu on subventionne la consommation au meme taux que l impot sur le revenu du travail et donc ce n est pas un guide pratique pour la politique de plus un regime de taxe sur la consommation ou de maniere equivalente d impot uniforme sur le revenu avec subvention a l investissement au meme taux peut etre ameliore en taxant le revenu du capital plus fortement que celui du travail

the role and design of the corporate income tax proposals for tax reform have focused on the role of the corporate tax as either i a tax on pure profits or ii a withholding tax against certain forms of income capital gain income or income accruing to nonresidents little attention has been paid to reconciling these two functions we discuss how both functions can be combined so that the corporate tax can collect revenue from economic rents and withhold income at the same time we explicitly consider both nonfinancial firms and financial intermediaries

unemployment and the shadow economy abstractcurrent research links the shadow economy se and the unemployment rate either indirectly or by means of a preliminary estimate this article establishes and empirically implements a methodology for estimating the size of the se as a direct function of the tax and unemployment rates this link is found to be extremely relevant in countries with high unemployment rates such as greece and spain and less relevant in countries with moderate unemployment rates such as germany and italy unemployment s contribution to the se is shown to be significant especially in the years following the economic downturn of 2008 the calculation of the variance and distribution of these estimates is another significant contribution the common criticism that se estimates are unreliable is addressed by calculating the variance and the distribution of the estimates and the large size of the se in greece and spain is once again confirmed

the asymmetric role of shadow economy in the energy growth nexus in bolivia abstract this paper estimates the energy demand function to examine the asymmetric relationship between the shadow economy and energy consumption in the case of bolivia during the period of 1960 2015 the ambiguous empirical findings on shadow economy energy demand nexus has inclined us to apply the nonlinear ardl cointegration approach developed by shin et al 2014 and the hatemi j 2012 asymmetric causality test the empirical evidence confirms the presence of an asymmetric relationship between the variables of interest positive and negative shocks to official gdp true gdp and the shadow economy have positive impacts on energy consumption energy consumption is positively and negatively affected by positive and negative shocks in financial development respectively a positive negative shock to capital decreases energy consumption another important finding concerns the complex causal direction between economic growth and energy consumption this study provides new insights regarding to the use of official gdp true gdp and the shadow economy as economic tools to maintain energy demand for sustainable economic development

direct measurement of hidden labour the hidden economy suddenly appeared in economic research in 1977 and has since attracted much attention from economists the central problems are how to assess the scale and causes of this illicit phenomenon many different methods of measurement have been applied to different western countries unfortunately these methods yield extremely different size estimates they also appear to measure different things this paper reviews the methods used and makes a strong case for direct methods an example of a direct method used in the netherlands is presented the results are used to analyse the relation between hidden and regular activities

what determines the value and volume of noncash transactions evidence from a panel of european and north american countries using data from a panel of 15 countries over the period 1990 1998 the determinants of the use of non cash payment instruments are analysed the estimation results highlight the importance of distinguishing between the determinants of the value and volume of noncash transactions it is found in fact that the volume of these transactions is generally affected by changes in the determinants more strongly than their value and that variables such as the interest rate have a different impact on the volume and the value of the transactions the findings also suggest that past habits play a dominant role in the intensity of use of noncash payment instruments

foreign demand for domestic currency and the optimal rate of inflation we characterize the ramsey optimal rate of inflation in a model with a foreign demand for domestic currency in the absence of such demand the model implies that the friedman rule deflation at the real rate of interest is optimal we show analytically that in the presence of a foreign demand for domestic currency this result breaks down calibrated versions of the model deliver optimal annual rates of inflation between 2 and 10 the domestically benevolent government imposes an inflation tax to extract resources from the rest of the world in the form of seignorage revenue

swedish tax rates labor supply and tax revenues effective marginal tax rates on labor income for the representative swede have increased from roughly 50 percent in 1959 to 80 percent today the effects of this increase in the level of taxation are examined using a two sector model parameterized to correspond to the swedish economy the model contains a single household which allocates labor to either taxed essentially market or untaxed largely household uses the estimated long run effects are sufficient to explain up to 75 percent of the recent decline in the measured growth rate of the swedish gnp calculations of total tax revenues are also derived from the model these peak when the tax rate is approximately 70 percent indicating that sweden is presently on the downward sloping portion of its laffer curve

the monetary method to measure the shadow economy the forgotten problem of the initial conditions abstract we show that when the money demand function used to estimate the size of the shadow economy includes the lagged dependent variable the need to assume a known initial condition reappears as it was the case in the early monetary methods

the speed of euro adoption this paper estimates the speed and determinants of euro adoption across italian provinces by exploiting the natural experiment in early 2002 when euro and lira dually circulated as legal tender a unique data set with daily observations on the net flows of euro banknotes from the branches of the bank of italy province by province is used the speed of euro adoption differs according to the availability of transaction technology and demographic characteristics lessons for countries adopting a new currency are obtained

searching for a kuznets curve in environmental efficiency using kernel estimation abstract the paper constructs environmental efficiency indexes for a sample consisting of high and low income countries using nonparametric production frontier techniques and then establishes an environmental kuznets relationship for environmental efficiency by nadaraya watson kernel estimation methodology

what produces a hidden economy an international cross section analysis by economists the phenomenon has been discussed for a long time by politicians and the public in mediterranean countries such as italy where it is known as lavoro nero and in developing countries it is however quite new for it to be seriously studied by professional economists gutmann s estimate 14 that the hidden economy currently comprises at least 10 of officially measured gnp in the united states has received wide attention in the press and in congressional committees feige 8 comes up with a corresponding figure of 33 of gnp for 1978 and has more recently lowered it to 27 of official gnp for the same year 9 these two authors as well as many others point to the revolutionary consequences 15 16 of the existence of a hidden economy of such size in particular the official statistics provide mistaken signals to the public decisionmakers they are led to think that there is wide spread unemployment because of the official unemployment statistics while in fact a considerable amount of those unemployed do indeed work similarly there may be an underestimate of the rate of growth in income and an overestimate of the rate of inflation the importance of the untaxed hidden economy for public revenues is obvious the official measures leaving out or considering only in part the hidden economy may also lead to systematically biased estimates of econometric models at the micro and macro level the present study pursues three purposes the first is to identify problem areas of future economic policy both with respect to the causes producing and the countries being affected by a hidden economy it turns out that in several countries the problems created by a rising hidden economy are expected to be so significant that policy makers are well advised to direct their attention to the subject

monetary policy and the zero bound to interest rates a review1 this paper reviews the literature on what the zero bound to nominal interest rates implies for the conduct of monetary policy the aim is to evaluate the risks of hitting the zero bound and to evaluate policies that are said to be able to reduce that risk or policies that are proposed as means of helping the economy escape if it is in a zero bound trap i conclude that policies aimed at cure are arguably more uncertain tools than those aimed at prevention so prevention is a less risky strategy for policymakers but since the risks of hitting the zero bound seem quite small anyway and the risks of encountering a deflationary spiral smaller still it is conceivable that inflation objectives that typify modern monetary regimes already have more than enough insurance built into them to deal with the zero bound problem

can farrell s allocative efficiency be generalized by the directional distance function approach abstract cost or revenue efficiency measurement based on the approach initiated by farrell has received great attention from academics and practitioners since the fifties farrell s approach decomposes cost efficiency into two different sources viz technical efficiency and allocative efficiency technical efficiency is estimated by means of the shephard input or output distance functions while allocative efficiency is derived as a residual between cost or revenue efficiency and its corresponding technical efficiency component the directional distance function ddf was introduced later in the literature to complete duality theory with respect to the profit function and as a generalization of the shephard input and output distance functions considering the case of cost efficiency we show that although the ddf correctly encompasses the technical efficiency component of the farrell approach this is not true for the allocative component we show that both approaches yield different allocative in efficiency terms unless technical efficiency is assumed and how these terms are related the practical implications of the multiplicative and additive approaches are discussed and illustrated

how should central banks determine and control their bank note inventory abstract this paper looks at a relatively unresearched but important area in money and banking namely the provision of currency by the central bank one of the most important functions of central banking is the provision of liquidity to the economy however in fulfilling this function central banks have to be prepared for unexpected money demand shocks as well as production transportation and cost of capital constraints the paper develops a dynamic cost minimizing note inventory model that solves for the central bank s optimal note order size and frequency as part of the modeling exercise a value at risk model is used to solve for an inventory cushion

the impact of environmental regulation shadow economy and corruption on environmental quality theory and empirical evidence from china abstract mounting environmental pressures led china to focus on the effectiveness of the environmental regulation to control pollution since the shadow economy or underground economic activities that are not included in official statistics accounts for an increasing fraction of china s economy its impacts on environmental quality should be carefully evaluated in this study the main research questions are as follows 1 what is the extent of the effect of environmental regulation on environmental quality and 2 what are the factors that influence the impact of environmental regulation on environmental pollution a theoretical model is developed to explain the relationship among the environmental regulation shadow economy and environmental quality in china an empirical analysis is conducted to test the three propositions of the model thereby examining the explanatory power of the theoretical model concretely using panel data from 30 provinces for the period of 1998 2012 the generalized method of moments gmm method is employed to control for potential endogeneity and introduce dynamic effects the estimation results indicate that stringent environmental regulation and the level of the shadow economy are both positively related to china s environmental pollution however the results also indicate that tighter environmental control would help reduce pollution at a given level of the shadow economy moreover an increase in the proportion of corrupt officials may weaken the environmental regulation which would consequently lead to the increase in illegal production and total pollutant emissions besides many economic and social factors may also affect the environmental quality for instance the development of secondary industry contributes toward an increase in pollutant emissions however increased research and development r d spending on eco friendly industrial operations can help to reduce pollution

does variability in crimes affect other crimes the case of international corruption and shadow economy abstractusing data on more than 125 countries this article attempts to add to the research linking corruption and the shadow economy by examining the effect of variability uncertainty in one whi

an econometric method of estimating the hidden economy united kingdom 1960 1984 estimates and tests in this paper a method of estimating the unrecorded part of the gnp based on a modified reset procedure applied to a currency demand equation is proposed the model passes all standard diagnostic tests and the estimates of the unrecorded economy provide plausible answers when used as a proxy for the tax evaded income the method is easily applicable to most countries with minor modifications copyright 1990 by royal economic society

on the neutrality of flow of funds corporate taxation real income earning business activities of firms rather than the financial ones furthermore it has virtually ignored the implications of the financial structure of the firm for the neutrality of flow of funds taxation of both real and financial activities of the firm in a model of the firm in which the financial structure has been explicitly included we shall be particularly concerned with the sorts of flow of funds tax systems suggested by the meade report the so called r and r f bases we will show that whether the investment decision is distorted under such corporate tax bases depends on how the financial structure of the firm is determined the r base is neutral under some financial constraints while the r f base is neutral under others 3 we also extend the analysis to incorporate personal taxes impinging on capital income and the effects of inflation finally we introduce financial assets held by the firm we show that the r base can be generalized to what we call the r a base this base will be neutral under the same borrowing constraints for which the r base is neutral in general the r f base as defined in the meade report will not capture all the profits arising from financial intermediation and may

the size and development of the shadow economy an empirical investigation from states of india abstract using the state level data from india this paper investigates the size of the hidden economy in indian states over the period 1974 75 to 1995 96 our analysis has shown that after liberalization of the indian economy in 1991 92 the growth in the size of the hidden economy has decreased on an average our results show that the growth in the size of the hidden economy is approximately 4 less in scheduled election years than in all other years we also demonstrate that the growth is significantly lower in those states where the coalition government is in power an increased growth of newspapers and the literacy rates translate to cleaner governance e g to fewer amounts of shadow economy activities in the economy

tax evasion and the demand for currency in norway and sweden is there a hidden relationship variables associated with the level of hidden economic activity are examined in terms of their effects on the demand for currency in norway and sweden aggregate time series of marginal tax rates are compiled for this purpose no such effects are evident for norway while in the case of sweden the demand for currency was found to be significantly related to marginal tax rates these estimates are then used as a basis for deriving an estimate of the size of the hidden economy in sweden an analysis of the assumptions underlying this procedure shows that the uncertainty involved in applying the currency approach to measuring the size of the hidden economy is so great as to make it hazardous to rely on such estimates