corruption and the shadow economy one way or two way street this paper attempts to bring some resolution to the relation between corruption and the shadow economy while previous research focuses on the static relationship between the two we account for dynamics using a panel vector autoregression model and consider influences from the official economy and institutional quality using cross national panel data for 108 countries over the period 1984 2006 results show a bidirectional relationship with initial complementarity and substitution over time thus the nature of the two way street is shown to change over time and our consideration of dynamics reveals the complementarity substitution switch

from shadow to green linking environmental fiscal reforms and the informal economy in the past few decades many papers have analysed in some depth different environmental tax reforms and the double dividend hypothesis i e the possibility of improving not only the environment but also the economy through the reduction of distortions in the tax system recently more stress has been placed on testing empirically what effects a reduction in labour taxes may have on unemployment when accompanied by a carbon or other environmental tax however such studies have not modelled the effects of the presence of a shadow economy even though informal markets account for a significant and growing part of gdp in many developed economies this paper analyses this link using an applied general equilibrium model for the case of spain which has one of the highest unemployment rates in the world and one of the biggest informal economies of any wealthy country we conclude that our analysis strengthens the case for an environmental tax reform in spain if revenues from a co2 tax are recycled via a labour tax reduction

taxing the unobservable the impact of the shadow economy on inflation and taxation summary because the shadow economy cannot be taxed it erodes the tax base and reduces tax revenues forcing governments to resort to other ways to finance their expenditures accordingly a larger shadow economy should give governments an incentive to shift revenue sources from taxes to inflation in line with the public finance motive of inflation in this paper we recall that point in a simple canonical model then empirically test it in a sample of up to 153 developed and developing countries over the 1999 2007 period in line with the model s prediction we indeed observe a positive relation between inflation and the size of the shadow economy and a negative relation between the tax burden and the size of the shadow economy we find that both relations are conditional on central bank independence and on the exchange rate regime implying that it is the strongest in institutional set ups that constrain monetary policy the least both relations are present in the sub sample of developed countries as well as the sub sample of developing countries both relations survive several robustness checks using various sets of control variables including the stock of debt controlling for endogeneity using alternative estimates of the shadow economy and estimating the two relations as a system of equations

the effect of taxes on labor supply in the underground economy this paper uses micro data from a randomized survey carried out in the metropolitan area of quebec city canada to analyze the decision to evade taxes and work in the underground economy the results indicate that taxes distort labor market activities away from the regular sector to the underground sector but the distortion is small for the average worker the distortion is large however for particular groups of the population such as welfare claimants copyright 1994 by american economic association

regulatory discretion and the unofficial economy johnson kaufmann and shleifer 1997 find that the share of the unofficial economy in gdp is determined by the extent of control rights held by politicians and bureaucrats in post communist economies exploring in more detail the role of bribes and using a broader data set from the oecd latin america and transition economies we find that the unofficial economy accounts for a larger share of gdp when there is more corruption and when the rule of law is weaker while these findings are consistent with the earlier results for transition economies in the larger country sample we find it is not necessarily the case that more regulation or higher taxes directly increases the size of the unofficial economy the problem appears to be not regulation or taxation per se but whether the state administrative system can operate without corruption a high level of regulatory discretion helps create the potential for corruption and drive firms into the unofficial economy

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

measuring the hidden economy implications for econometric modelling in this paper i support using econometric techniques to measure the size of the hidden underground economy because such information is important for the construction of certain economic models and for empirical policy analysis generally detailed information on the output of the hidden economy is unavailable even where careful measures of the underground economy have been constructed usually these data are available only periodically important exceptions are the classic results of tanzi 1983 for the united states and bhattacharyya s 1990 series for the united kingdom in the case of the new zealand economy a time series of data on the hidden economy has been generated recently giles 1997a this provides the unusual opportunity to undertake econometric modelling in a way which takes account of such activity formally moreover we can examine the policy implications arising from the linkages between hidden output and various measured economic aggregates this abstract was borrowed from another version of this item

has work sharing worked in germany industry by industry basis in an attempt to raise employment whether this work sharing works is theoretically ambiguous i exploit the cross industry variation in standard hours reductions to examine their impact on actual hours worked wages and employment analysis of industry level data suggests that work sharing may have reduced employment in the period 1984 1994 using individual data from the german socio economic panel i substantiate the union claim of full wage compensation the hourly wage rose enough to offset the decline in actual hours worked

do ethics matter tax compliance and morality in this article we argue that puzzle of tax compliance can be explained at least in part by recognizing the typically neglected role of ethics in individual behavior that is individuals do not always behave as the selfish rational self interested individuals portrayed in the standard neoclassical paradigm but rather are often motivated by many other factors that have as their main foundation some aspects of ethics we argue that it is not possible to understand fully an individual s compliance decisions without considering in some form these ethical dimensions specifically we argue here that there is much direct and indirect evidence that ethics differ across individuals and that these differences matter in significant ways for their compliance decisions we then put this in the larger context of the inability of the standard neoclassical paradigm to explain compliance of at least some individuals and we suggest several possible avenues by which theory can be expanded to incorporate ethics we conclude by arguing that a full house of compliance strategies is needed to combat tax evasion strategies that include the traditional enforcement paradigm suggested by and consistent with neoclassical theory a less traditional service paradigm that recognizes the important role of a kinder and gentler tax administration in encouraging compliance and importantly a new trust paradigm that is built on the foundation of ethics in which the tax administration must recognize that it can erode the ethics of taxpayers by its own decisions

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

tax evasion the underground economy and financial development abstract we study the relationship between the underground economy and financial development in a model of tax evasion and bank intermediation agents with heterogeneous skills seek loans in order to undertake risky investment projects asymmetric information between borrowers and lenders implies a menu of loan contracts that induce self selection in a separating equilibrium faced with these contracts agents choose how much of their income to declare by trading off their incentives to offer collateral against their disincentives to comply with tax obligations the key implication of the analysis is that the marginal net benefit of income disclosure increases with the level of financial development thus in accordance with empirical observation we establish the result that the lower is the stage of such development the higher is the incidence of tax evasion and the greater is the size of the underground economy

on the economic rationale of estimating the hidden economy the estimation of the hidden economy may be considered as a human passion for knowing the unknown although a large literature on the hidden economy exists the subject is still controversial at a very basic level there are disagreements about 1 the definition of the hidden activities 2 the terms used to describe these activities 3 the estimation or measurement procedures and finally 4 on the use of these estimates in economic analysis in this paper we will only consider the issues related to estimation economic and econometric analysis of the hidden economy thus we implicitly accept the term hidden economy and explicitly state the definition before entering into the main discussions for a comprehensive study of past literature readers are referred to feige 1989 gaertner and wenig 1985 and tanzi 1982 and the large number of references in these books the use of the hidden economy estimates for economic and econometric analysis can be classified into three potentially distinct but interrelated categories a the derivation of economic theory and or its implication for the existing theories b the formulation of economic policies and c econometric modelling if we consider that the tax evaded income is the only constituent of the hidden economy then the issues are almost obvious for all three categories however as we will see later such a simple interpretation of the hidden economy estimates is generally not possible for example in this paper we define the hidden economy as the unrecorded national income the unrecorded national income is calculated as the difference between the potential national income for the given currency in circulation and the recorded national income this definition of the hidden economy suggests that in principle it is larger than the tax evaded income the empirical illustrations are taken from the studies conducted in the united kingdom and india where this is a workable definition however for many other countries such an approach is totally inadequate as a measure of unrecorded national income since the method of estimating the hidden economy is constrained by the structure of the economy in this paper we shall present a brief description of a general method of estimating the hidden economy and appraise the applicability and limitation of the method due to space constraint we shall discuss very briefly the importance of the hidden economy on economic theory and on the empirical

the shadow economy in transition countries friend or foe a policy perspective abstract by treating the shadow economy as a distinct entity rather than just a symptom of policy failures we are able to examine its short term and dynamic consequences for development first we construct measures of the size of the shadow economy in 25 transition countries for 1990 97 we find hysterisis suggesting that once established the shadow economy is hard to remove a dollar decline rise in official gdp is attenuated by a shadow expansion contraction of 31 25 cents we then examine whether the shadow economy prevents merely slows down or actually promotes economic growth and competitiveness and through what mechanisms we also consider implications for policymaking

quantifying the black economy measurement without theory yet again i shall argue that measurement without theory is a fair description of the published empirical work aimed at guestimating the size of the hidden or black economy i shall also argue that a mere guestimate of the overall size of the black economy is of limited value for the policy maker it is also important to know who is doing what where how and why then we can see what should and or can be done about legislating for or against the black economy in assessing the various attempts to measure the size of the black economy one should also be aware of a political dimension to some of this work perhaps a large and growing black economy is an indication that the economy is overtaxed and over regulated and a neo liberal adjustment is needed to free it up if a large part of the black economy is social security fraud then maybe unemployment is not really as bad as it looks clearly such political conclusions depended on having good theoretical as well as sound quantitative foundations and both these components were generally missing

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

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

the underground economies tax evasion and information distortion list of contributors preface introduction edgar l feige part i the meaning measurement and policy implications of the underground economies 1 the meaning and measurement of the underground economy edgar l feige 2 information distortions in social systems the underground economy and other observer subject policymaker feedbacks robert r alford and edgar l feige 3 policy illusion macroeconomic instability and the unrecorded economy robert t mcgee and edgar l feige 4 how large or small should the underground economy be bruno frey part ii the underground economy in western developed nations measurement in different laboratories 5 monetary perspective on underground economic activity in the united states richard d porter and amanda s bayer 6 the unrecorded economy and the national income accounts in the netherlands a sensitivity analysis g a a m broesterhuizen 7 assessing the underground economy in the united kingdom michael o higgins 8 the underground economy in the federal republic of germany a preliminary assessment enno langfeldt 9 the underground economy in sweden ingemar hansson 10 the irregular economy of italy a survey of contributions bruno contini 11 the hidden economy in norway with special emphasis on the hidden labor market arne jon isachsen and steiner strom 12 canada s underground economy rolf mirus and roger s smith 13 the underground economy in france philippe barthelemy part iii the underground economy under central planning 14 the soviet second economy in a political and legal perspective f j m feldbrugge 15 second economy and socialism the hungarian experience istvan r gabor bibliography

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

income tax policy and lifetime labor supply abstract a progressive income tax structure provides incentives for individuals to alter their rate of work and their age of retirement compared to a zero tax or proportional tax equilibrium progressive taxation induces individuals to take less leisure in the form of retirement in exchange for more leisure during the worklife especially at high wage levels the imposition of a special pension tax provision on top of a progressive tax structure offsets the distortion on leisure alternatives imposed by progressivity indeed the pension tax deferral provision can neutralize the impact of tax progressivity on the work profile over life the magnitude of these tax inducements in the u s tax structure are non trivial and therefore are expected to alter labor supply decisions over the lifetime the model finds empirical support using data from the social security newly entitled beneficiaries survey

human appropriation of natural capital a comparison of ecological footprint and water footprint analysis the water footprint concept introduced in 2002 is an analogue of the ecological footprint concept originating from the 1990s whereas the ecological footprint ef denotes the bioproductive area hectares needed to sustain a population the water footprint wf represents the freshwater volume cubic metres per year required in elaborating the wf concept into a well defined quantifiable indicator a number of methodological issues have been addressed with many similarities to the methodological concerns in ef analysis the methodology followed in wf studies is in most cases analogous to the methodology taken in ef studies but deviates at some points well reasoned it has been chosen for instance to specifically take into account the source and production circumstances of products and assess the actual water use involved thus not taking global averages as a result one can exactly localise the spatial distribution of a water footprint of a country with respect to the outcome of the footprint estimates one can see both similarities and striking differences food consumption for instance contributes significantly to both the ef and the wf but mobility and associated energy use is very important only for the ef from a sustainability perspective the wf of a country tells another story and thus at times will put particular development strategies in a different perspective the paper reviews and compares the methodologies in ef and wf studies compares nation s footprint estimates and suggests how the two concepts can be interpreted in relation to one another the key conclusion is that the two concepts are to be regarded as complementary in the sustainability debate

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

releasing constraints to growth or pushing on a string policies and performance of mexican micro firms abstract using firm level data from mexico this paper investigates the firm characteristics associated with participation in credit markets access to training tax payments and membership in business associations we find that firms which participate in these institutions exhibit significantly higher profits moreover firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business but firms that received credit exhibit lower rates of income growth these results persist when firm characteristics that are arguably correlated with unobserved entrepreneurial ability are controlled for our findings suggest that the significant within country differences in firm productivity observed in developing economies are due in part to market and government failures that limit the ability of micro firms to reach their optimal sizes

a review of recent multi region input output models used for consumption based emission and resource accounting abstract the interest in consumption based emission and resource accounting has grown significantly many studies juxtapose consumer emissions carbon footprint and producer territorial emissions of greenhouse gases in order to demonstrate the effects of trade on the national emission budget to this end a respectable number of studies have been undertaken worldwide in order to estimate emissions embedded in international trade of numerous countries and world regions input output approaches and increasingly multi region input output mrio models are commonly chosen as they provide an appropriate methodological framework for complete carbon footprint estimates at the national and supra national level with increasing processing capabilities of computers and a wider availability of economic accounts environmental accounts and trade data such models are now being implemented on a wide scale after a brief overview of salient single region input output studies i provide an in depth review of the most recent multi region input output models used for the purpose of consumption based environmental accounting the main methodological features and important results are described for around twenty studies covering the years 2007 to 2009 this is followed by a detailed review of studies dealing with uncertainty in mrio analysis an area which has not received a lot of attention so far i conclude that further research is mainly needed in two areas a improvements in data availability and quality and b improvements in the accuracy of mrio modelling

the underground economy in the late 1990s evading taxes or evading competition summary this paper studies the driving forces behind the considerable expansion of the underground economy during the late 1990s i propose a novel explanation for this phenomenon the sharp increase in market competition worldwide which reduces prices and profits and drives firms into the shadow economy empirical evidence from a panel covering 45 countries from 1995 to 2000 shows that increased competition is indeed correlated with an expansion of the underground economy the effect is strongest in low tax high corruption countries that do not provide the public services which make it worthwhile for firms to remain official despite growing competitive pressure

the canadian underground and measured economies granger causality results using new time series data for the size of the canadian underground economy the relationship between unreported and measured gdp in that country is examined granger causality tests are conducted with a proper allowance for the non stationarity of the data it is found that there is clear evidence of such causality from measured gdp to hidden output but only very mild evidence of granger causality in the reverse direction this result supports similar evidence for new zealand reported by the first author and has several interesting policy implications

opening the pandora s box trade openness and informal sector growth this article constructs a labour transition model combining the features of job loss and job creation in the formal sector of an economy the theoretical model examines the impact of trade liberalization on net job transition from formal to informal sector in the light of our model we establish certain pre conditions based on simulations under which trade liberalization is accompanied by rising informal sector the model outcome conforms to the empirical evidence of rising informality with openness which we find in 18 central eastern european and former soviet union countries

shadow economies at times of banking crises empirics and theory this paper investigates the response of the shadow economy to banking crises our empirical analysis based on a large sample of countries suggests that the informal sector is a powerful buffer which expands at times of banking crises and absorbs a large proportion of the fall in official output to rationalise our evidence we build a dynamic stochastic general equilibrium model which accounts for financial and labour market frictions and for nominal rigidities in line with the empirical literature on the shadow economy we assume that in the informal sector access to external finance is limited and the production technology is relatively more labour intensive following a banking shock in the official sector the model predicts a large negative transmission to the unofficial economy that substantially dampens the overall effect of the shock

water use in the spanish economy an input output approach against the background of the water limitations that often appear in spain the aim of this paper is to study the behaviour of the productive sectors of the spanish economy as direct and indirect consumers of water to that end we employ input output analysis with the particular methodology being based on the linkages analysis known as the hypothetical extraction method hem we have introduced three modifications to this method first the valuation is made in terms of water consumption secondly we obtain the components of the impacts of each block of activity into which the economy is divided with these components being described as the internal effect mixed linkage net or external backward linkage and net or external forward linkage thirdly this methodology is used to detect key sectors our results confirm the marked importance of the agriculture food and other services blocks as regards the direct and indirect consumption of water in general we also find that other services chemicals metals and electronics and agriculture blocks play an important role in explaining the consumption of drinking water moreover the hem analysis allows us to classify productive sectors according to their forward or backward linkage character in a way that is more precise than that permitted by earlier methods finally this methodology can be extended to other types of environmental pressures 2002 elsevier science b v all rights reserved

sovereign debt markets in light of the shadow economy we investigate the controversial role of the informal sector in the economy of 64 countries between 2003 and 2007 by focusing for the first time on the impact it has on sovereign debt markets in addition to a standard ordered probit regression we employ two nonparametric neural network modeling techniques in order to capture possible complex interactions between our variables results confirm our main hypothesis that the informal sector has significant adverse effects on credit ratings and lending costs mlp neural networks offer the best fit to the data followed by the rbf neural networks and probit regression respectively the results do not change with respect to the stage of economic development of a country and contradict views about the possibility of significant economic benefits arising from the informal sector our study has important implications especially in the context of the ongoing sovereign debt crisis since it suggests that a reduction in the informal sector of financially challenged countries is likely to help in relaxing credit risk concerns and cutting down lending costs finally a decision tree analysis is used to exploit the inherent discreteness in the data and derive intuitive rules with respect to the level of the informal sector

approaches for estimating noncompliance examples from federal taxation in the united states crime and underground economic activity are a fact of life around the world most societies attempt to control these activities through the expenditure of resources on monitoring prosecution punishment and educational programmes gathering statistics about who is engaging in illegal or underground activity the frequencies with which various crimes or underground transactions are occurring and the severity or magnitude of these acts is crucial for making good decisions regarding our allocation of resources in this area unfortunately in general it is very difficult to obtain accurate information about these issues this is partly because the individuals engaged in such activities wish not to be identified and often take actions to avoid detection and partly because by their very nature the activities tend not to generate economic accounting legal demographic or other cultural records the fact that it is difficult to obtain accurate information about the activities however does not in any way imply that we should not make a concerted effort to try to obtain the best information we can i believe the cost associated with attempting to determine the extent and nature of these activities is in most circumstances well below the expected benefit which includes the likelihood of improved decisionmaking by relevant government personnel and the general public as a result i also believe the debate about developing estimates of illegal or underground economic activity should primarily focus on practical issues related to how best to go about developing estimates that are as reliable as possible in this short article i shall discuss the measurement of noncompliance with laws and regulations my particular area of expertise and shall not discuss the measurement of other kinds of hidden economic behaviours such as informal contracting unmeasured home production and grey market activities in particular i shall discuss three approaches for estimating the aggregate amount of noncompliance with respect to a specific law or regulation i intensive data collection for a focused subsample of the population ii detection controlled estimation and iii the comparision of estimates generated by distinct datasets and models for each i shall describe in general terms what the approach is and how it is implemented review limitations of the approach and present an example of the application of the approach to the measurement of tax noncompliance in the united states my discussion shall necessarily be short and i refer the interested reader to a variety of original research publications for more details especially about the specific examples

corruption top down or bottom up this article studies the impact of corruption on an economy with a hierarchical government in particular we study whether centralizing corruption within the higher level of government increases or decreases the total amount of corruption we show that when the after tax relative profitability of the formal sector as compared to that of the informal sector is high enough adding a layer of government increases the total amount of corruption by contrast for high enough public wages and or an efficient monitoring technology of the bureaucratic system centralization of corruption at the top of the government hierarchy redistributes bribe income from the lower level to the upper level in the process total corruption is reduced and the formal sector of the economy expands

tax evasion in transition outcome of an institutional clash testing feige s conjecture in albania a field survey of households was conducted in tirana albania in 2000 a response rate of 89 3 yielded 1 340 valid questionnaires allowing me to test feige s in nelson j m tilley c walker l eds transforming post communist political economics national academy press washington dc p 21 conjecture that more tax evasion will be observed when formal and informal institutions clash respondents attitudes towards formal and informal institutions were obtained by applying factor analysis to their responses to a series of attitudinal questions the theoretical importance of the interaction between formal and informal institutions in determining tax evasion finds empirical support in the data

local autonomy tax morale and the shadow economy policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale however there is an alternative bottom up approach that decentralises political power to those who are close to the problems this paper analyses the relationship with local autonomy we use data on tax morale at the individual level and macro data on the size of the shadow economy to analyse the relevance of local autonomy and compliance in switzerland the findings suggest that there is a positive negative relationship between local autonomy and tax morale size of the shadow economy

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

analysing andalusian virtual water trade in an input output framework dietzenbacher e and velazquez e 2007 analysing andalusian virtual water trade in an input output framework regional studies 41 1 12 andalusian agricultural sectors are relatively small but account for 90 of annual water consumption more than 50 of the agricultural final demands is exported to other spanish regions or abroad using the concept of virtual water within an input output framework it is found that a substantial part of andalusian water consumption is embodied in its exports considering the virtual water content of its trade andalusia is a net exporter of water examining regional policy aspects a reduction in the exports abroad of agricultural products yields considerable benefits in terms of water savings while the negative effects are only moderate dietzenbacher e et velazquez e 2007 une analyse des echanges andalous d eau virtuelle dans le contexte d un tableau d echanges interindustriels regional studies 41 1 12 les secteurs agricoles andalous sont relativement petit

analyzing the determinants of the shadow economy with a separate approach an application of the relationship between inequality and the shadow economy this paper suggests a separate approach to analyze the determinants of the shadow economy se it is applied to investigate the relationship between inequality and the se on a cross section of 118 countries we disentangle the effect of inequality on the se ratio by estimating both direct and indirect effects on both the numerator and denominator of the ratio separately we find that an increase in inequality increases the se ratio this positive correlation is primarily due to a reduction in the official gdp rather than an increase in the se

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

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

review of de soto s the mystery of capital in the mystery of capital hernando de soto promotes his explanation of why formal capital markets function poorly in developing countries de soto argues that much of the population of developing countries lacks access to credit not because they lack assets but because ownership of their property is secured informally which prevents the use of property as collateral the inability to convert assets into capital keeps the developing world from benefiting from capitalism

the shadow economy as an equilibrium outcome abstract we construct a dynamic general equilibrium model of tax evasion where agents choose to report some of their income unreported income requires using a payment method that avoids recordkeeping in some markets cash trade using cash to avoid taxes is the shadow economy in our model we then calibrate our model using money interest rate and gdp data to back out the size of the shadow economy for a sample of countries and compare our measures to traditional reduced form estimates

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

uses and abuses of estimates of the underground economy ered valuable by at least a part of society narcotics production and distribution prostitution gambling these activities can be large in some countries and should be counted in the national accounts of all countries although they rarely are their omission affects the comparability of data across countries the incomes generated by illegal activities are rarely taxed many other activities such as those associated with the subsistence or informal sectors are estimated rather than measured and are generally not taxed because of the low value they generate to those who engage in them in conclusion there are many reasons beside the ones discussed in this paper why the measurements of national output may not be complete about two decades ago a few economists became convinced that many normal economic activities that should be measured and taxed were taking place underground or in the shadow thus presumably escaping the attention of the statistical offices of the tax authorities and more generally of the government regulators some of these economists also claimed that like alice in wonderland these hidden activities were growing in a ridiculous fashion see gutmann 1977 and feige 1979 by the late 1970s the role of government had grown enormously so that the level of taxation and the tax rates had risen sharply and regulations had proliferated in many countries see tanzi and schuknecht 1997 these developments had created strong incentives for individuals and enterprises to go underground to avoid taxes and regulatory restrictions thus a good case could be made that what came to be called the underground economy was a phenomenon to worry about newspaper articles were ready to accept the

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

embodied agricultural water use in china from 1997 to 2010 abstract water is an important element in agricultural production the recent population growth rapid urbanization and fast industrialization present increasing challenges for china s agricultural water use embodied water has been promoted as a substantial indicator for the assessment of water consumption induced by human activities however few studies have investigated the dynamic change in embodied agricultural water use by time series data the findings of such studies may facilitate the development of comprehensive sustainable water usage strategies thus this study quantifies the embodied agricultural water trade as well as production and consumption based agricultural water footprints in china by using an input output model during 1997 2010 according to the results china s average embodied agricultural water intensity shows a declining trend from 43 33 m3 thousand yuan in 1997 to 32 66 m3 thousand yuan in 2010 the average embodied agricultural water intensity of the primary industry is larger than those of the secondary and tertiary industries china has always been a net exporter of agricultural water at the industrial level the primary industry is a net importer because of the increasing food demand in china the secondary industry has consistently been a net exporter and the tertiary industry has maintained a trade balance the production and consumption based embodied agricultural water uses demonstrate similar changing trends both decrease from 1997 to 2007 and then significantly increase in 2010 the embodied agricultural water consumed by the primary industry shows a downward trend whereas those consumed by the secondary and tertiary industries demonstrate an opposite trend therefore in addition to the improvement of agricultural water efficiency adjustments in consumption and trade structure are highly instrumental to the conservation of local agricultural water resources

assessment of regional trade and virtual water flows in china the success of china s economic development has left deep marks on resource availability and quality some regions in china are relatively poor with regards to water resources this problem is exacerbated by economic growth flourishing trade activities on both domestic and international levels have resulted in significant amounts of water withdrawal and water pollution hence the goal of this paper is to evaluate the current inter regional trade structure and its effects on water consumption and pollution via virtual water flows virtual water is the water embedded in products and used in the whole production chain and that is traded between regions or exported to other countries for this assessment of trade flows and effects on water resources we have developed an extended regional input output model for eight hydro economic regions in china to account for virtual water flows between north and south china the findings show that the current trade structure in china is not very favorable with regards to water resource allocation and efficiency north china as a water scarce region virtually exports about 5 of its total available freshwater resources while accepting large amounts of wastewater for other regions consumption by contrast south china a region with abundant water resources is virtually importing water from other regions while their imports are creating waste water polluting other regions hydro ecosystems

market consumption and hidden consumption a test for substitutability in this paper an empirical analysis is performed on the relationship between private consumption and underground economy for the italian case it is found that private market consumption and underground or hidden consumption may be defined as complementary goods an increase in underground consumption tends to increase family market consumption and increase its marginal utility an implication of this result is that the nonmarket sector does not offer hedging opportunities to the consumer worker as stressed by busato and chiarini s 2004 artificial economy moreover wealth effects associated with a change in underground consumption are negative a statistical model confirms this structural interpretation

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

input output analysis of co2 emissions embodied in trade the effects of sector aggregation abstract energy related co2 emissions embodied in international trade have been widely studied by researchers using the environmental input output analysis framework it is well known that both sector aggregation and spatial aggregation affect the results obtained in such studies with regard to the latter past studies are often conducted at the national level irrespective of country or economy size for a large economy with the needed data studies may be conducted at different levels of spatial aggregation we examine this problem analytically by extending the work of su et al su b huang h c ang b w zhou p 2010 input output analysis of co2 emissions embodied in trade the effects of sector aggregation energy economics 32 1 166 175 on sector aggregation we present a numerical example using the data of china and by dividing the country into eight regions it is found that the results are highly dependent on spatial aggregation our study shows that for a large country like china it is meaningful to look into the effect of spatial aggregation

can africa compete with china in manufacturing the role of relative unit labor costs in this paper examine sub saharan africa s ssa bilateral trade and cost competitiveness with china we review patterns of bilateral trade between ssa and china showing an extraordinary imbalance in the structure of trade in that china overwhelmingly exports manufactured products to ssa and almost exclusively imports primary products in return our principal means of assessing the competitiveness of ssa s manufacturing sector vis a vis china are measures of relative unit labor costs rulc we find that african rulc levels have generally been very high relative to china but declined over the 2000s as china s wages have risen faster than chinese productivity while the reverse is true for the ssa countries in our sample nevertheless rulc vis a vis china remained elevated for many ssa countries as of 2010 generally high rulc along with weaknesses in the business climate suggest that most ssa countries are unlikely to be competitive in labor intensive manufacturing any time soon

production uncertainty and the market equilibrium of the competitive firm abstract assumptions outputs are planned ex ante by risk neutral firms actual outputs are stochastic with variance function of planned output production costs are function of planned outputs while the market linear demand function is stable if individual outputs as positively correlated expected profit is decreased by the negative covariance between output and price the firms and market equilibria are analyzed in the short run and the long run with varying number of firms they are compared with oi s and tisdell s uncertain demand models

a comparison of the labor force behavior of married women in the united states and canada with special attention to the impact of income taxes estimation results are presented for the probability of working the hourly wage rate and the annual hours of work for wives in seven different age groups in both the u s and canada federal and state or provincial taxes are incorporated into the analysis an iterative estimation method is employed to circumvent the statistical problems resulting from the dependence of the hours of work on the tax rate and the dependence of the tax rate on the hours of work authors

shedding light on the shadow economy a nighttime light approach abstractmeasuring the shadow economy is inherently difficult but critical for understanding economic development using census data on formal and informal sectors in cambodia we document that 96 6 per cent of non farm establishments do not formally register with the government and their sales accounted for 76 6 per cent of total sales in 2011 estimating their past sales from changes in nighttime light for 1993 2010 we find that both formal and informal firms increased their estimated sales the share of informal sales increased from 68 8 per cent in 1993 to 76 6 per cent in 2011 suggesting that the informal sector increased quantitatively in both absolute and relative terms over time

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

informality in the process of development and growth informality is a term used to describe the collection of firms workers and activities that operate outside the legal and regulatory systems it is widespread in the majority of developing countries in a typical developing economy the informal sector produces about 35 per cent of gdp and employs 70 per cent of the labour force this paper studies informality in the context of economic development by presenting a model and projections that link informality regulations migration and economic growth this analytical framework highlights the trade offs between formality and informality the relationship between the different types of informality and the connection between them and the forces of labour capital and productivity growth the paper models the behaviour of the informal sector based on the following fundamental asymmetry formal firms confront higher labour costs while informal firms face higher capital costs and lower productivity using mandated minimum wages as the policy induced distortion the model first studies the static allocation of formal and informal capital and labour in a modern economy second it opens the possibility of labour migration from a rudimentary economy with ample supply of labour e g rural areas or less advanced neighbouring countries third the model analyses the dynamic behaviour of the formal and informal sectors considering how they affect and are affected by economic growth and labour migration then the paper presents projections for the size of labour informality in the modern and rudimentary economies in the next two decades for a large group of countries representing all regions of the world the projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations

heterogeneous firms and the impact of government policy on welfare and informality we analyze the formality benefits through productivity enhancing public goods we document that benefits from formality matter for firms optimal decisions there is a disconnect between the objectives of maximizing formality versus welfare this disconnect is mitigated under higher formality benefits

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

a macroeconomic rationing model of the belgian economy despite a wide recognition of the possible theoretical fruitfulness of the quantity rationing approach there prevails an equally wide suspicion as to the possibility of getting sensible econometric results out of this type of specification our aim in the following will be to show that sensible results can indeed be obtained we shall consider for that purpose the belgian goods and labor markets over the years 1953 1978 and specify the econometric model along the lines suggested in the previous chapter

does marketing activity contribute to a society s well being the role of economic efficiency does the level of marketing activity in a country contribute to societal well being or quality of life does economic efficiency also play a positive role in societal well being does economic efficiency also moderate or mediate the marketing activity effect on societal well being marketing activity refers to the pervasiveness of promotion expenditures and number of retail outlets per capita in a country economic efficiency refers to the extent to which the economy is unhampered by corruption burdensome government regulation and a large informal economy we used secondary data from the world bank and other statistical sources to answer these questions our study findings suggest that both marketing activity and economic efficiency contribute positively to societal well being and that economic efficiency plays more of a mediator than moderator role between marketing activity and societal well being the public policy implication of this study is that increases in marketing activity and economic efficiency in countries characterized as low on both dimensions should significantly increase the quality of life in those countries

multi scale input output analysis of consumption based water resources method and application this work develops a method of multi scale input output analysis for the embodied water accounting of an economy this method can distinguish between the different virtual water contents of imported and local products and is therefore capable of accurately estimating the virtual water that is embodied in trade as a simplified model rather than a multi regional input output analysis this method substantially minimizes the data requirements with the support of averaged eora global embodied water intensity databases for the world and chinese economies a three scale embodied water input output analysis of the beijing economy in 2007 has been conducted dozens of virtual water flows that relate to the beijing economy have been identified and analyzed only 15 of the total water resources embodied in beijing s local final demand were from local water withdrawal 85 were from domestically and internationally imported products the virtual water import is revealed to play a more important role than physical water transfer in easing beijing s water shortage since the average water use efficiency of the beijing economy is much higher than that of the chinese economy but somewhat lower that of the rest of the world beijing is suggested to shifting its imports to foreign countries to optimize global water use the method developed can be useful for water saving strategies for multiple responsible entities holding different opinions and it can be easily applied to the embodied water accounting of a sub national or even smaller economic community

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

the effects of irregular markets on macroeconomic policy some estimates for belgium abstract the paper aims at evaluating the efficiency of traditional keynesian demand or neo classical income policies in the presence of an irregular sector the analysis is applied to the belgian economy for which it is shown that the objectives of increasing output and employment and reducing the importance of the irregular economy will often lead to conflicting policy prescriptions in addition keynesian multipliers may be lowered by as much as 40 though the irregular market only represents some 10 to 15 of total activity