Tedds, Lindsay (2005): The Underground Economy in Canada. Published in: in Size, Causes and Consequences of the Underground Economy,Chris Bajada and Friedrich Schneider eds. , Ashgate Publishing, UK (2005)
Download (171kB) | Preview
There is considerable agreement internationally about the factors that determine the relative size of the underground economy (tax burden, regulation, enforcement, confidence in government, labour force characteristics, and morality) and that evidence of underground activity will be captured in several economic indicators (GDP, currency in circulation, and consumption rates). Until recently, however, the methods that have been employed to measure the underground economy focused on only a few causal factors, one indicator, and only produced an estimate for one particular point in time. There exists a modeling technique that treats the underground economy as an unobservable or latent variable and incorporates multiple indicator and multiple causal (MIMIC) variables. The MIMIC model uses information contained within relevant indicator and causal variables to estimate a time-path of the size of the hidden economy. In applying this estimation technique to Canada data, my results indicate that, the underground economy in Canada grew steadily relative to measured GDP over the period 1976 to 2001. The value of the broadly defined underground economy grew from about 7.5% of GDP in 1976 to about 15.3% in 2001. In real (1997) dollar terms, it increased from about $38 billion to $159 billion.
|Item Type:||MPRA Paper|
|Original Title:||The Underground Economy in Canada|
|Subjects:||O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O51 - U.S.; Canada
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
|Depositing User:||Lindsay Tedds|
|Date Deposited:||24. Jul 2007|
|Last Modified:||13. Feb 2014 17:08|
Apel, Mikael (1994). An Expenditure-Based Estimate of Tax Evasion in Sweden. Working Paper 1994:1, Department of Economics, Uppsala University. Barthelemy, Phillippe (1988). The Macroeconomic Estimates of the Hidden Economy: A Critical Analysis. Review of Income and Wealth, 34, 183-208. Berger, Seymour (1986). The Unrecorded Economy: Concepts, Approach and Preliminary Estimates for Canada, 1981. Canadian Statistical Review, 22, vi-xxvi. Bhattacharyya, D.K. (1990). An Econometric Method of Estimating the ‘Hidden Economy’, United Kingdom (1960-1984): Estimates and Tests. Economic Journal, 100, 703-717. Cagan, Phillip (1958). The Demand for Currency Relative for the Total Money Supply. Journal of Political Economy, 66, 302-328. Canada (1999). Report of the Auditor General of Canada to the House of Commons. Ottawa: Public Works and Government Services), chapter 2. Canada Customs and Revenue Agency (2000). News Releases, 12 June. Dellago, Bruno (1990). The Irregular Economy: The “Underground Economy” and the “Black Labour Market. Dartmouth: Publishing Company. Dell’Anno, Roberto (2003). Estimating the Shadow Economy in Italy: A Structural Equation Approach. Working Paper 2003-07, Institut for Økonomi, Aarhus University. Dickey, D.A. and S.G. Pantula (1987). Determining the Order of Differencing in Autoregressive Processes. Journal of Business and Economic Statistics, 15, 455-461. Dilnot, A.W. and C.N. Morris (1981). What do we Know About the Black Economy. Fiscal Studies, 2, 58-73. Drummond, Don, Mireille Éthier, Maxime Fougère, Brian Girard, and Jeremy Rudin (1994). The Underground Economy: Moving the Myth Closer to Reality. Canadian Business Economics, 2, 3-17. Éthier, Mireille (1982). L’Economie Souteraine: Revue de la Litterature et Nouvelles Estimation pour le Canada. Mimeograph, Department of Finance, Ottawa. ______ (1985). The Underground Economy: A Review of the Economic Literature and New Estimates for Canada. In Francois Vaillancourt (Ed.), Income Distribution and Economic Security in Canada (77-109). Toronto: University of Toronto Press. Feige, Edgar L (1979). How Big is the Irregular Economy? Challeng, 22, 5-13. Flexman, Bruce. (1997) Canadian Attitudes Towards Taxation. In O. Lippert and M. Walker (Eds), The Underground Economy: Global Evidence of its Size and Impact (53-74). Vancouver: The Fraser Institute. Frey, B.S. and H. Weck-Hannemann (1984). The Hidden Economy as an Unobserved Variable. European Economic Review, 26, 33-53. Gervais, Gylliane (1994). The Size of the Underground Economy: A Statistics Canada View. Statistics Canada, Catalogue No. 13-603. Giles, D. E. A. (1999). The Hidden Economy and the Tax-Gap in New Zealand: a Latent Variable Analysis. Empirical Economics, 24, 621-640. ______ and Lindsay M. Tedds (2002). Taxes and the Canadian Hidden Economy, Toronto: Canada Tax Foundation. Gutmann, Peter M (1977). “The Subterranean Economy.” Financial Analysts Journal, 34, 24-27. Haas, R. D. (1979). “Short Note on the Recent Behaviour of Currency. Mimeograph, Bank of Canada, Ottawa. Haldrup, N. (1994). The asymptotics of single-equation cointegration regressions with I(1) and I(2) variables. Journal of Econometrics, 63, 153-181. Helberger, Christof and Helmut Knepel (1988). How Big is the Shadow Economy? A Re-Analysis of the Unobserved-Variable Approach of B. S. Frey and H. Weck-Hannemann. European Economic Review, 32, 965-976. Hill, Roderick (2002). The Underground Economy in Canada: Boom or Bust? The Canadian Tax Journal, 50, 1641-1654. ______ and Muhammed Kabir (1996). Tax Rates, the Tax Mix, and the Growth of the Underground Economy in Canada: What Can We Infer. Canadian Tax Journal, 44, 1552-1583. ______ (2000). Currency Demand and the Growth of the Underground Economy in Canada. Applied Economics, 32, 183-192 Kalman, R. E. (1960). A New Approach to Linear Filtering and Prediction Problems. Journal of Basic Engineering, 35-45. Karoleff, Vladimir, Rolf Mirus and Roger S. Smith (1993). Canada’s Underground Economy Revisited: Update and Critique. Paper presented at the 49th Congress of the International Institute of Public Finance, Berlin. Kaufmann, Daniel and Aleksander Kaliberda (1996). Integrating the Unofficial Economy into the Dynamics of Post Socialist Economies: A Framework for Analyses and Evidence. Working Paper 1691, World Bank, Washington. Kurozumi, Eiji (2002). Testing for Stationarity with a Break. Journal of Econometrics, 108, 63-99. ______ and Dominik Enste (2000). Increasing Shadow Economies All Over the World – Fiction or Reality? A Survey of the Global Evidence of Their Size and Their Impact From 1970 to 1995. Journal of Economic Literature, 38, 77-114. Kwiatkowski, D., P.C.B. Phillips, P. Schmidt, and Y. Shin (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54, 159-178. Lemieux, Thomas, Bernard Fortin, and Pierre Fréchette (1994). The Effect of Taxes on Labor Supply in the Underground Economy. American Economic Review, 84, 231-254. Loayza, Norman V. (1996). The Economics of the Informal Sector: A Simple Model and Some Empirical Evidence from Latin America. Carnegie-Rochester Conference Series on Public Policy, 45, 129-162. Lyssiotou, Panayiota, Panos Pashardes and Thanasis Stengos (2004). Estimates of the Black Economy Based on Consumer Demand Approaches. Economic Journal (forthcoming). MacKinnon, James G (1991). Critical Values for Co-Integration Tests. In Robert F. Engle and Clive W. J. Granger (Eds.), Long-Run Economic Relationships (267-276). Oxford: Oxford University Press. Mirus, Rolf (1984). The Invisible Economy: Its Dimensions and Implications. In George Lermer (Ed.), Probing Leviathan, An Investigation of Government in the Economy (113-126). Vancouver: The Fraser Institute. ______ and Roger S. Smith (1981). Canada’s Irregular Economy. Canadian Public Policy 7, 444-453. ______ (1997). Self-Employment, Tax Evasion, and the Underground Economy: Micro-Based Estimates for Canada. Working Paper 1002, International Tax Program, Harvard Law School. ______ and Vladimir Karoleff (1994). Canada’s Underground Economy Revisited: Update and Critique. Canadian Public Policy, XX, 235-251. Mogensen, Gunnar V., Hans K. Kvist, Eszter Kömendi and Soren Pedersen (1995). The Shadow Economy in Denmark 1994: Measurement and Results. The Rockwool Foundation Research Unit, Copenhagen. Ng, S. and A. Karoyli (1984). The Underground Economy in Canada: Preliminary Estimates. Mimeograph, Bank of Canada, Ottawa. OECD (2002). Canada: Maintaining Leadership Through Innovation. OECD Review of Regulatory Reform series. Paquet, Gilles (1989). The Underground Economy.” Policy Options, 10, 3-6. Peritz, Ingrid (2004). Boozing scam artists steal hearts of viewers. Globe and Mail, Monday February 16. Perron, P. (1989). The Great Crash, the Oil Price Shock and the Unit Root Hypothesis. Econometric, 57, 1361-1401. Pissarides, Christopher A., and Guglielmo Weber (1989). An Expenditure-based Estimate of Britain’s Black Economy. Journal of Public Economics, 39, 17-32. Pouftis, A (1993). Estimating the Size of the Underground Economy in Canada. M.A. Dissertation Essay, Department of Economics, Queen’s University. Said, S.E. and D.A. Dickey (1984). Testing for Unit Roots in Autoregressive-Moving Average Models of Unknown Order. Econometrica, 71, 599-607. Schnieder, Friedrich and Reinhard Neck (1993). The Development of the Shadow Economy under Changing Tax System and Structuer. Finanzarchiv N F, 50, 344-369. Schneider, F. (1997). Empirical Results for the Size of the Shadow Economy of Western European Countries Over Time. Working Paper 9710, Institut Für Volkswirtschaftslehre, Linz University. ______ (2000). The Increase of the Size of the Shadow Economy in 18 OECD Countries: Some Preliminary Explanations. Mimeograph, Department of Economics, Johannes Kepler University of Linz, Austria. ______ and Dominik Enste (2000). Increasing Shadow Economies All Over the World – Fiction or Reality? A Survey of the Global Evidence of Their Size and Their Impact From 1970 to 1995. Journal of Economic Literature, 38, 77-114. Schneider, Friedrich and Christopher Bajada, (2003). “The Size and Development of the Shadow Economies in the Asia-Pacific. Working Paper 0301, Department of Economics, Linz University. Schuetze, Herb J. (2002). Profiles of Tax Noncompliance Among the Self-Employed in Canada, 1969-1992. Canadian Public Policy, XXVIII. Smith, Philip M (1994). Assessing the Size of the Underground Economy: The Statistics Canada Perspective. Canadian Economic Observer, 7, 3.16-3.33. Smith, Roger S. Smith (2002). The Underground Economy: Guidance for Policy Makers? The Canadian Tax Journal, 50, 1655-1661 Spiro, Peter S (1993). Evidence of a Post-GST Increase in the Underground Economy. Canadian Tax Journal, 41, 247-258. ______ (1994). Estimating the Underground Economy: A Critical Evaluation of the Monetary Approach. Canadian Tax Journal, 42, 1059-1081. Tanzi, Vito (1980). The Underground Economy in the United States: Estimates and Implications. Banco Nazionale del Lavoro, 135, = 427-453. Tedds, Lindsay M (1998). Measuring the Size of the Hidden Economy in Canada. M.A. Extended Essay, Department of Economics, University of Victoria. Thomas, Jim (1999). Quantifying the Black Economy: Measurement without Theory Yet Again. Economic Journal, 109, F381-F337.