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The Underground Economy: An Introduction
... A number of studies have estimated the magnitude of the DTE for the U.S. Among the major contributions in this endeavor are those by Tanzi (1982;), Feige (1989), Bawley (1982, Carson (1984), Pozo (1996), and Pyle (1989. Based on such studies, there appear to be three primary approaches to estimating the size of the DTE (or of the underground economy): ...
... The B.E.A. computes the discrepancy between the aggregate AGI reported to the IRS and an independent estimate of the aggregate AGI derived from the N.I.P.A. (National Income and Product Accounts) estimate of aggregate personal income. This approach is argued by certain researchers such as Carson (1984) and Feige (1989) to be a reasonable indicator of the lower bound of the DTE. ...
This study empirically investigates the impact of a variety of factors on income tax evasion in the United States over the period 1973 to 1997. The aggregate estimates indicate that federal income tax evasion may be an increasing function of the federal personal income tax rate and the public's dissatisfaction with government. In addition, income tax evasion may be a decreasing function both of penalties imposed by the IRS on unpaid taxes and IRS audit rates. Moreover, a trend variable that may to some extent reflect the impact of improved IRS income-detection technologies over time exhibits a negative and significant coefficient, implying that such technologies may diminish tax evasion.
... For example, Tanzi (1983) defines the informal economy as "activities that are legal in nature but are not reported to official authorities due to non-payment of taxes and non-compliance with some government laws." Carson (1984) also suggests that "a group of people lie about their employment or income status in order to use some government benefits and be included in the use of these benefits with this lie. In addition, individuals who disagree with certain government policies may disregard tax laws. ...
The direct and indirect impacts of information and communication technology (ICT) on environmental pollution and carbon dioxide (CO2) emissions in developing economies are significant. This study provides a comparative analysis of the indirect effects of ICT on CO2 emissions through the informal sector in high- and middle-income countries. A threshold panel model is employed to estimate the impact of ICT on the informal sector’s effect on CO2 emissions in 26 high-income countries and 24 middle-income countries from 1995 to 2019. The findings indicate that in high-income countries, both ICT and the informal sector contribute to reducing CO2 emissions. ICT has two thresholds, 65.1331 and 82.4453, in these countries. As ICT surpasses each threshold, the informal sector’s reducing effect on CO2 emissions increases. In countries with middle incomes, ICT reduces CO2 emissions, but the informal sector increases them. ICT has two thresholds, 2.2066 and 62.3899, in these countries. As ICT surpasses each threshold, the incremental effect of the informal sector on CO2 emissions declines. Furthermore, energy consumption and population density have a significant positive impact on CO2 emissions in both country groups and trade have a significant negative impact on CO2 emissions and the Kuznets curve is confirmed in high-income countries. Based on these results, prioritize ICT adoption in the informal sector for sustainability and CO2 reduction in middle-income countries, and foster stakeholder collaborations for comprehensive strategies integrating ICT, the informal sector, and environmental sustainability.
Graphical abstract
... For example, Tanzi (1983) defines the informal economy as "activities that are legal in nature but are not reported to official authorities due to non-payment of taxes and non-compliance with some government laws." Carson (1984) also suggests that "a group of people lie about their employment or income status in order to use some government benefits and be included in the use of these benefits with this lie. In addition, individuals who disagree with certain government policies may disregard tax laws. ...
Reducing carbon emissions is crucial on both global and national scales due to their impact on the climate. However, concerns about rent-seeking behavior hindering emissions reduction policies have arisen, as such policies can be costly. The presence of crony capitalism in countries is a significant concern in this regard, which unfortunately has not been considered a research gap. To investigate the impact of crony capitalism on CO2 emissions in 73 countries between 2000 and 2021, this study employed the innovative Method of Moment Quantile Regression (MM-QR). Four proxies for crony capitalism were used, including economic freedom, the International Country Risk Guide (ICRG) indicators, worldwide governance indicators, and a combined proxy of the three proxies aimed at reducing crony capitalism. The results indicated that all four proxies for crony capitalism significantly reduced CO2 emissions at different quantiles. The composite proxy was the most effective, while the ICRG proxy was the least effective. Additionally, all proxies except for the ICRG proxy had a greater impact on reducing CO2 emissions at high quantiles. Therefore, crony capitalism leads to an increase in CO2 emissions. The study confirmed the Kuznets curve and found that energy consumption and industrialization increase CO2 emissions, while higher energy prices and population reduce CO2 emissions.
... For example, Tanzi (1983) defines the informal economy as "activities that are legal in nature but are not reported to official authorities due to non-payment of taxes and non-compliance with some government laws." Carson (1984) also suggests that "a group of people lie about their employment or income status in order to use some government benefits and be included in the use of these benefits with this lie. In addition, individuals who disagree with certain government policies may disregard tax laws. ...
The direct and indirect impacts of information and communication technology (ICT) on environmental pollution and carbon dioxide (CO2) emissions in developing economies are significant. This study investigates the indirect effects of ICT on CO2 emissions through the informal sector. A threshold panel model is employed to estimate the impact of ICT on the informal sector's effect on CO2 emissions in 24 high-income countries and 30 upper-middle and lower-middle income countries from 1995–2019. The findings indicate that in high-income countries, both ICT and the informal sector contribute to reducing CO2 emissions. When ICT surpasses the threshold of 64,469, the informal sector's reducing effect on CO2 emissions increases. In countries with upper-middle and lower-upper-middle incomes, ICT reduces CO2 emissions, but the informal sector increases them. ICT has two thresholds, 0.976 and 61.57, in these countries. As ICT surpasses each threshold, the incremental effect of the informal sector on CO2 emissions declines. Furthermore, the Kuznets curve is confirmed in both country groups. Energy consumption and population density have a significant positive impact on CO2 emissions.
... De igual forma, los factores de naturaleza económica, política y social que coadyuvan el desarrollo de la criminalidad organizada son utilizados como indicadores para valorar el riesgo de emergencia criminal, asumido como alerta temprana (Albanese, 2001;Vander Beken, 2004;Williams y Godson, 2002). Ello, sin obviar que las estadísticas específicas sobre grupos criminales en las que se basan muchos gobiernos para evaluar los riesgos derivados de la delincuencia organizada se nutren de cálculos particularmente difíciles, aunque no imposibles de verificar y objetivar (Carson, 1984;Greenfield, 1993;Blades y Roberts, 2002;Van Duyne y Levi, 2005). ...
El crimen organizado transnacional (COT) se ha erigido como una de las
amenazas de mayor impacto para la seguridad pública a escala mundial.
Por su geometría variable y su capacidad de penetración envolvente, constituye un factor de riesgo permanente para la vida cotidiana de las personas y la sostenibilidad de las sociedades. La capacidad de infiltración que despliega en las economías e instituciones de diversa naturaleza incorpora potentes lógicas de corrupción, camuflaje paralegal y mecanismos de cooptación o coerción hacia sectores estratégicos públicos y privados. No en vano representa un amplificado peligro para los servicios de inteligencia, para la cooperación policial, la política exterior de los Estados nacionales y la seguridad internacional.
El libro expone varios análisis interdisciplinarios y debates contemporáneos sobre el crimen organizado a partir de una visión sistémica y relativamente holística que recoge enfoques provenientes de la seguridad multidimensional, la Criminología, las Relaciones Internacionales y la Economía Política sin descuidar los aportes teóricos y metodológicos de las corrientes científicas utilizadas. Ofrece, de igual manera, algunas posibilidades de análisis y aplicación empírica en diferentes áreas del conocimiento especializado porque aborda el crimen organizado como un fenómeno complejo en constante evolución.
... Put another way, it includes all activity which is conceptually within the national income accounts' definitions but not captured for lack of an adequate auditing trail. Carson (1984) provides a useful schema for viewing economic activity that produces utility, may produce income, and is frequently considered part of the underground economy. These activities can be market or nonmarket, as well as legal or illegal. ...
This research was designed to reveal the magnitude of consumer use of informal suppliers, in order to determine the level of unmeasured or “underground” economic activity in the U.S. economy. The results of this study are based on a national probability sample of households which reported their purchases across 15 broad categories of goods and services. The authors conclude that consumers' use of suppliers in the underground economy accounts for a very minor portion of consumer expenditures.
... In 2001, the IRS initiated a new National Research Program (NRP) relying on less intrusive audits to estimate unreported income and the gross and net "tax gap" for the years 2001 and 2006. 7 Suspicions that the nation's information system was biased motivated the BEA to clarify the relationship between unreported income on tax returns and unrecorded income that might be missing from the NIPA (Carson, 1984;Parker 1984). The BEA, well aware of deficiencies in the tax data on which it relies for measuring components of the national accounts, accordingly included "misreporting adjustments" in its estimates of income aggregates. ...
Abstract
This paper reviews the meaning and measurement of key unobserved economies, specifying what they have in common, what distinguishes one from another and their interconnections. It focuses attention on the unobserved economies germane to tax evasion and macroeconomic information systems, namely, the unreported, non-observed, underground, illegal, informal and unrecorded economies, reviewing the progress and shortcomings of national and international agency efforts to measure these unobserved economies. We then examine Professor Schneider’s Shadow Economy (SSE), its meaning and the veracity of his claim to have estimated its size and trend worldwide by a MIMIC model. It concludes that SSE estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, making them unworthy of a place in the academic and policy literature.
... In 2001, the IRS initiated a new National Research Program (NRP) relying on less intrusive audits to estimate unreported income and the gross and net "tax gap" for the years 2001 and 2006. 7 Suspicions that the nation's information system was biased motivated the BEA to clarify the relationship between unreported income on tax returns and unrecorded income that might be missing from the NIPA (Carson, 1984;Parker 1984). The BEA, well aware of deficiencies in the tax data on which it relies for measuring components of the national accounts, accordingly included "misreporting adjustments" in its estimates of income aggregates. ...
This paper reviews the meaning and measurement of unobserved economies germane to tax evasion and macroeconomic information systems. These include unreported, non-observed, underground, illegal, informal and unrecorded economies. It reviews the progress and shortcomings of national and international agency efforts to measure these unobserved economies, noting what they have in common, what distinguishes one from another and their interconnections. It then examines the meaning of Professor Schneider's shadow economy (SSE), and the veracity of his claim to have accurately estimated its size and trend worldwide by employing a MIMIC model methodology. It concludes that SSE estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, questioning their place in the academic, policy and popular literature.
... Program (NRP) relying on less intrusive audits to estimate unreported income and the gross and net "tax gap," for the years 2001 and 2006. 7 Suspicions that the nation's information system was biased motivated the Bureau of Economic Analysis (BEA) (Carson, 1984;Parker 1984) to clarify the relationship between unreported income on tax returns and unrecorded income that might be missing from the National Income and Product accounts (NIPA). The BEA, well aware of deficiencies in the tax data on which it relies for measuring components of the national accounts, accordingly included "misreporting adjustments" 8 in its estimates of income aggregates. ...
This paper reviews the meaning and measurement of unobserved economies germane to tax evasion and macroeconomic information systems. These include the unreported, non-observed, underground, illegal, informal and unrecorded economies. It reviews the progress and shortcomings of national and international agency efforts to measure these unobserved economies, noting what they have in common, what distinguishes one from another and their interconnections. It then examines the meaning of Professor Schneider's Shadow Economy (SSE), and the veracity of his claim to have accurately estimated its size and trend worldwide by employing a MIMIC model methodology. It concludes that SSE estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, questioning their place in the academic, policy and popular literature.
... 6 Slemrod (2004, p.84) concludes that the IRS' Taxpayer Compliance Measurement Program (TCMP) produced " the most comprehensive, and probably most accurate, data on tax compliance for any country at any time " . The TCMP consisted of 45,000-50,000 intensive " audits from hell " of sample tax returns for the years 1973 , 1976 , 1979 , 1982 , 1985 and 1988 Suspicions that the nation's information system was biased motivated the Bureau of Economic Analysis (BEA) (Carson, 1984; Parker 1984) to clarify the relationship between unreported income on tax returns and unrecorded income that might be missing from the National Income and Product accounts (NIPA). The BEA, well aware of deficiencies in the tax data on which it relies for the national accounts, accordingly included " misreporting adjustments " 8 in its estimates of income aggregates. ...
This paper reviews the meaning and measurement of unobserved economies germane to tax evasion and macroeconomic information systems. These include the unreported, non-observed, underground, illegal, informal and unrecorded economies. It reviews the progress and shortcomings of national and international agency efforts to measure these unobserved economies, noting what they have in common, what distinguishes one from another and their interconnections. It then examines the meaning of Professor Schneider's Shadow Economy (SSE), and the veracity of his claim to have accurately estimated its size and trend worldwide by employing a MIMIC model methodology. It concludes that SSE estimates suffer from conceptual flaws, apparent manipulation of results and insufficient documentation for replication, questioning their place in the academic, policy and popular literature.
... Among the types of information thusly obtained and analysed are data on income tax evasion, income tax rates, penalties assessed on detected unpaid income taxes and audit rates. Such studies endeavour typically either seek to estimate the relative extent of tax evasion or to identify determinants thereof (Tanzi, 1982;Clotfelter, 1983;Carson, 1984;Crane and Nourzad, 1987;Poterba, 1987;Pyle, 1989;Erard and Feinstein, 1994;Feige, 1994;Joulfaian and Rider, 1996;Cebula, 1997;2004;2011;2013;Ali et al., 2001;Alm and Yunus, 2009;Cebula et al., 2009). ...
This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the net impact of higher federal income tax rates on personal income tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate federal personal income tax evasion may be an increasing function of the percentage of federal personal income tax returns characterized by itemized deductions and a decreasing function of the Tax Reform Act of 1986 (during the first two years of implementation), the ratio of the tax free interest rate yield on high grade municipals to the interest rate yield on ten year Treasury notes, and higher audit rates of filed federal income tax returns (as a measure of risk from tax evasion) by IRS personnel. Finally, unpopular wars may provide a secondary benefit for and therefore act as an inducement for greater tax evasion.
... Gervais (1994) is an admirable study in many ways, and brings to light a considerable amount of useful information. However, it is not a new methodology, but is a more detailed application of the approach used by Carson (1984), who works for the U.S. equivalent of Statistics Canada. Some would categorize this approach as a sensitivity analysis rather than a bottom-up estimate. ...
The underground economy generates considerable controversy, but amidst this controversy one should not lose sight of the fact that some elements of consensus have emerged.
... Among, the types of information thusly obtained and analyzed are data on the magnitude of income tax evasion in the economy, income tax rates, and audit rates. Such studies endeavor typically either to estimate the aggregate degree of tax evasion or to identify the determinants thereof (Bawley, 1982;Tanzi, 1982Tanzi, , 1983Clotfelter, 1983;Carson, 1984;Long & Gwartney, 1987;Musgrave, 1987;Pyle, 1989;Feinstein, 1991;Klepper, Nagin & Spurr, 1991;Erard & Feinstein, 1994;Feige, 1994;Pozo, 1996;Cebula, 2001Cebula, , 2004Cebula, , 2008Ali, Cecil, & Knoblett, 2001;Ledbetter, 2004;Connelly, 2004;Alm & Yunus, 2009;Cebula & Coombs, 2009). ...
... pend very much upon the feature of the wider system to which it is being re? lated. This, along with the different disciplinary interests, accounts for why there are upwards of 30 different terms for the activity, each with a different scope and connotation (see Carson, 1984;Ferman, Henry, and Hoyman, 1987). But there is some agreement that in an advanced capitalist society, these activities: ...
... Among the types of information thusly obtained and analyzed are data on income tax evasion, income tax rates, and audit rates. Such studies endeavor typically either to estimate the aggregate degree of tax evasion or to identify the determinants thereof [Tanzi, 1983;Clotfelter, 1983;Carson, 1984;Long --Gwartney, 1987;Pyle, 1989;Feinstein, 1991;Erard --Feinstein, 1994;Feige, 1989Feige, , 1994Feige, , 1996Cebula, 2001Cebula, , 2004Ali -Cecil --Knoblett, 2001;Ledbetter, 2004;Alm --Yunus, 2009;. ...
Unaccounted for currency in die U.S. has been argued to reflect die presence of widespread income tax evasion. In turn, income tax evasion is especially problematic in this era of large government budget deficits and growing national debts which have led to debt crises. This empirical study seeks to identify determinants of recent federal personal income tax evasion in the U.S. using the most recent tax evasion data available, data that run through 2008 and are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI (adjusted gross income) to reported AGI. The empirical estimates find that personal income tax evasion is an increasing function of the maximum marginal federal personal income tax rate, the interest rate yield on three year Treasury notes, per capita real income, and a dummy variable for the years in which the second war in Iraq was conducted, while being a decreasing function of the Tax Reform Act of 1986, the ratio of the tax free interest rate yield on high grade municipals to the taxable interest rate yield on ten year Treasury notes, the audit rate by IRS (Internal Revenue Service) personnel, and the average IRS penalty on detected unreported income. Thus, among other things, this study finds that more aggressive IRS policies are effective tools in the war against personal income tax evasion.
... Second, there are a number of studies that either (a) use questionnaires or (b) undertake experiments , such as Spicer and Lundsted (1976), Spicer and Thomas (1982), Baldry (1987), Alm, Jackson, and McKee (1992), Thurman (1991), and Alm, McClelland, and Schulze (1999). Third, there are those studies that use what is referred to as " official data, " such as Tanzi (1982), Clotfelter (1983), Carson (1984, Long and Gwartney (1987), *Jacksonville University, rcebula@ju.edu Pyle (1989), Feinstein (1991), Erard and Feinstein (1994), Feige (1994), Cebula (2001 Cebula ( , 2004), Ali, Cecil, and Knoblett (2001), Ledbetter (2004), Cebula and Coombs (2009), and Alm and Yunus (2009). ...
Using the most current data available, this study seeks to identify any new as well as traditional determinants of personal income tax evasion. A variety of empirical estimates find that income tax rates, the IRS audit rate and IRS penalty interest rates, and the unemployment rate all influence tax evasion. In addition, rarely inves-tigated variables including the tax-free interest rate, the public's job approval rating of the president, and the public's dissatisfaction with government, along with previously unstudied variables, namely, the real interest rate yield on Moody's Baa-rated long-term corporate bonds and the real interest rate yield on three-year Treasury notes, also affect income tax evasion.
... Second, there are a number of studies that either (a) use questionnaires or (b) undertake experiments, such as Spicer andLundsted (1976), Spicer and Thomas (1982),Baldry (1987), Alm, Jackson, and McKee (1992),Thurman (1991), andAlm, McClelland, andSchulze (1999). Third, there are those studies that use what is referred to as " official data, " such asTanzi (1982Tanzi ( , 1983),Clotfelter (1983), Carson (1984, Long andGwartney (1987), Pyle (1989), Feinstein (1991, Erard andFeinstein (1994), Feige (1994), Cebula (2001), Ali, Cecil, and Knoblett (2001), Ledbetter (2004),Cebula and Coombs (2009), and Alm and Yunus (2009). In this literature, it is widely believed that the degree of federal personal income tax evasion in the economy as a whole is positively affected by income tax rates (Tanzi 1982;Clotfelter 1983;Feige 1994). ...
Using the most current data available, this study seeks to identify any new as well as traditional determinants of personal income tax evasion. A variety of empirical estimates find that income tax rates, the IRS audit rate and IRS penalty interest rates, and the unemployment rate all influence tax evasion. In addition, rarely inves-tigated variables including the tax-free interest rate, the public's job approval rating of the president, and the public's dissatisfaction with government, along with previously unstudied variables, namely, the real interest rate yield on Moody's Baa-rated long-term corporate bonds and the real interest rate yield on three-year Treasury notes, also affect income tax evasion.
... Recent evidence suggests that entrepreneurs underreport their income more than employees and that blue collar entrepreneurs underreport more than white collar entrepreneurs (Carson, 1984;Lyssiotou et al., 2004). Under certain circumstances underreporting could lead to biased estimates of the returns to education for employees. ...
... An early application of this approach for the U.S. was by Carson (1984). Berger (1986) published a similar analysis for Canada two years later, and more recently, Gervais (1994) performed a detailed analysis of the expenditure side of GDP using this approach. ...
... Interestingly, Keuschnigg and Nielsen (2004) Institutional effects on entrepreneurship found that progressive tax always impairs entrepreneurship while the effect on welfare can be positive or zero. Alternatively, it is shown that high tax rates are associated with higher rates of entrepreneurship since self-employment creates a better opportunity for underreporting income than does wage employment (Carson, 1984;Blau, 1987;Aronson, 1991;Evans and Leighton, 1987;Long, 1982). This finding suggests that shifts in tax rates over time might explain changes in new business formation rates. ...
Purpose
The purpose of this paper is to provide an overview and synthesis of the extant literature in entrepreneurship by utilizing an uncommon and unique lens. The lens focuses on studies that explore the effects of formal (social institutions) and informal (national culture) institutional factors on entrepreneurship at the national level.
Design/methodology/approach
The design is a narrative literature overview of research published in peer reviewed journals in business and related fields from 1980 to 2009. North's classification of formal and informal institutions provides the structural framework. The overview includes salient published articles that empirically assessed the effect of at least one variable of the institutional context on entrepreneurship. The paper is organized as follows. After setting the context, legitimacy, and validity of contextual research in the entrepreneurship field in general, it reviews relevant research, focusing on the formal and informal institutional factors that affect entrepreneurship.
Findings
The review highlights the complex nature of entrepreneurship. Both formal and informal institutional factors affect entrepreneurship at multiple levels.
Research limitations/implications
The review is important as it synthesizes the results of published research and offers a starting point to understand the effect of macro contextual factors on entrepreneurship. It is also timely, as entrepreneurship plays a significant role in the economic well being of a nation, and many governments are actively seeking to increase entrepreneurial activity.
Practical implications
Policy makers can further entrepreneurship by understanding the role played by the institutional context. Applying appropriate institutional incentives is instrumental in enabling entrepreneurs in a more direct and effective manner.
Originality/value
The paper provides a new synthesis of formal and informal institutional effects on entrepreneurship at the nation‐level. As such, it goes beyond prior culture based reviews, and add to the understanding of macro nation effects of institutions on entrepreneurship.
... For example, the most recent edition of the Oxford Dictionary of Economics(Black 2002) has short entries for ''dual economy'' and ''household production'' but no reference to informal or traditional activities, a shadow economy, caring labor, or social reproduction.8 Bajada and Schneider (2005:3) note that under-estimation of national output distorts ''measures of economic growth(Houston 1990), the rate of inflation(Reuter 1982), the size of the business cycle(Bajada 2003), the rate of unemployment(McDonald 1984), productivity(Carson 1984), the size of the tax base(Hansson 1982), and the volume of savings(Greenfield 1993).'' ...
Global restructuring has dramatically affected the value, extent, and significance of informal economic activities worldwide. Approaching informalization as a systemic phenomenon, this essay illuminates linkages among economic processes, widening inequalities, “governance gaps,” and global insecurities. It considers the historical context in which distinctive approaches to informality emerged and reviews three principal “islands” of existing research: mainstream, structuralist, and feminist. These variously illuminate patterns of economic inequality that are central to studies of international political economy. Informality’s significance to IR and security studies is further illuminated through a discussion of the processes and political economy of informalization in relation to global migrations, and the interaction of economic and political informalization in the context of “new” wars and security crises.
... The rich theoretical literature on tax evasion [Allingham & Sandmo (1972), Yitzhaki (1974, Spicer & Lundsted (1976), Garcia (1978), Spicer & Thomas (1982), Carson (1984), Slemrod (1985), Baldry (1987), Falkinger (1988), Klepper, Nagin, & Spurr (1991), Thurman (1991, Alm, Jackson, & McKee (1992), Das-Gupta (1994), Pestieau, Possen, & Slutsky (1994), Yaniv (1994), Caballe & Panades (1997), Sandmo (2005)] has been comprehensively reviewed and analyzed by Cowell (1990), Andreoni, Erard, & Feinstein (1998), Slemrod (2007) and Slemrod and Weber (2011). The literature's theoretical models are inventive and mathematically elegant and can be employed to identify variables that are likely to affect tax compliance behavior. ...
This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal
income tax evasion in the U.S. Employing a refined version of Feige’s (Staff Papers, International Monetary Fund 33(4):768–881,
1986, 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find
that 18–23% of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the
range of 390–390–540 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an
increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and
per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency
ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the
results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results
of sufficient accuracy and reliability to serve as effective policy guides.
This study empirically investigates the extent of non compliance with the tax code and the determinants of federal income tax evasion in the U.S. using the most current such data available. Employing the most recent data we find that 18-19% of total reportable income is not properly reported to the IRS, giving rise to a "tax gap" approaching $500 billion dollars. Three time periods are studied, 1960-2008, 1970-2008, and 1980-2008. It is found across study periods that income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, public dissatisfaction with government, and per capita real GDP (adopted as a measure of income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented). Modest evidence of a negative impact of IRS audit rates on tax evasion is also detected.
This study empirically investigates the extent of non compliance with the tax code and the determinants of federal income tax evasion in the U.S. using the most current such data available. Employing the most recent data we find that 18-19% of total reportable income is not properly reported to the IRS, giving rise to a "tax gap" approaching $500 billion dollars. Three time periods are studied, 1960-2008, 1970-2008, and 1980-2008. It is found across study periods that income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, public dissatisfaction with government, and per capita real GDP (adopted as a measure of income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented). Modest evidence of a negative impact of IRS audit rates on tax evasion is also detected.
zet Kayıt dışı ekonomi, günümüz ekonomilerinin en önemli sorunlarından biri olarak karşımıza çıkmakta ve dünya ülkelerinin tamamında farklı nitelik ve boyutlarda kendini göstermektedir. Bu bağlamda; kayıt dışı ekonominin ortaya çıkış nedenlerinin tespit edilmesi, ülkelerin kayıt dışı ekonomi ile mücadelesinde doğru politikalar üretebilmeleri açısından önem teşkil etmektedir. 1970'li yıllardan itibaren çeşitli akademik çalışmalara konu olan kayıt dışı ekonomi kavramı günden güne önemini arttırmıştır. Kayıt dışı ekonominin sorunsal alanlarının başında gelmekte olan karapara ile mücadele hususunda kayıt dışı ekonomi ile mücadelede gereklilik arz etmektedir. Kayıtlı ekonominin kanayan yarası olarak literatürdeki yerini alan kayıt dışı ekonomi ve karapara ile mücadele üzerinde ülkelerin politikalar geliştirebilmesi için bu iki olgunun boyutunun tahmin edilmesi gerekmektedir. Nitekim ülke bazında kayıt dışı ekonominin ve karaparanın boyutunun doğru olarak ölçülebilmesi için, o ülkeye ait ekonomik, sosyal ve siyasal yapının belirlenmesi ve buna uygun yöntemlerin saptanması gerekmektedir. Bu çalışmada Sovyetler Birliği'nin dağılması sonucu ortaya çıkan geçiş ekonomilerinde kayıt dışı ekonomi ve karapara kavramlarının incelemesinin yanında kayıt dışı ekonomi ve karaparanın ekonomi içerisindeki boyutları üzerine literatür taraması yapılmıştır. Abstract Shadow economy emerges as one of the most important problems of today's economies and manifests itself in different qualities and dimensions in all countries in the world. In this respect; determining the reasons for the emergence of the shadow economy is important in terms of producing the right policies in the fight against the shadow economy. The concept of shadow economy, which has been the subject of various academic studies since the 1970s, has increased its importance day by day. The fight against black money, one of the problematic areas of the shadow economy, is also necessary in the fight against the shadow economy. The size of these two phenomena should be estimated in order for countries to develop policies on fight against the shadow economy and black money, which has taken its place in the literature as the bleeding wound of the formal economy. As a matter of the fact that, in order to accurately measure the size of the shadow economy and black money on a country basis, it is necessary to determine the economic, social and political structure of that country and to determine appropriate methods. In this study, besides the examination of the concepts of shadow economy and black money in the transition economies that emerged as a result of the collapse of the Soviet Union, a literature review has been made on the magnitude of shadow economy and black money in the economy.
Özet Kayıt dışı ekonomi, günümüz ekonomilerinin en önemli sorunlarından biri olarak karşımıza çıkmakta ve dünya ülkelerinin tamamında farklı nitelik ve boyutlarda kendini göstermektedir. Bu bağlamda; kayıt dışı ekonominin ortaya çıkış nedenlerinin tespit edilmesi, ülkelerin kayıt dışı ekonomi ile mücadelesinde doğru politikalar üretebilmeleri açısından önem teşkil etmektedir. 1970'li yıllardan itibaren çeşitli akademik çalışmalara konu olan kayıt dışı ekonomi kavramı günden güne önemini arttırmıştır. Kayıt dışı ekonominin sorunsal alanlarının başında gelmekte olan karapara ile mücadele hususunda kayıt dışı ekonomi ile mücadelede gereklilik arz etmektedir. Kayıtlı ekonominin kanayan yarası olarak literatürdeki yerini alan kayıt dışı ekonomi ve karapara ile mücadele üzerinde ülkelerin politikalar geliştirebilmesi için bu iki olgunun boyutunun tahmin edilmesi gerekmektedir. Nitekim ülke bazında kayıt dışı ekonominin ve karaparanın boyutunun doğru olarak ölçülebilmesi için, o ülkeye ait ekonomik, sosyal ve siyasal yapının belirlenmesi ve buna uygun yöntemlerin saptanması gerekmektedir. Bu çalışmada Sovyetler Birliği'nin dağılması sonucu ortaya çıkan geçiş ekonomilerinde kayıt dışı ekonomi ve karapara kavramlarının incelemesinin yanında kayıt dışı ekonomi ve karaparanın ekonomi içerisindeki boyutları üzerine literatür taraması yapılmıştır. Abstract Shadow economy emerges as one of the most important problems of today's economies and manifests itself in different qualities and dimensions in all countries in the world. In this respect; determining the reasons for the emergence of the shadow economy is important in terms of producing the right policies in the fight against the shadow economy. The concept of shadow economy, which has been the subject of various academic studies since the 1970s, has increased its importance day by day. The fight against black money, one of the problematic areas of the shadow economy, is also necessary in the fight against the shadow economy. The size of these two phenomena should be estimated in order for countries to develop policies on fight against the shadow economy and black money, which has taken its place in the literature as the bleeding wound of the formal economy. As a matter of the fact that, in order to accurately measure the size of the shadow economy and black money on a country basis, it is necessary to determine the economic, social and political structure of that country and to determine appropriate methods. In this study, besides the examination of the concepts of shadow economy and black money in the transition economies that emerged as a result of the collapse of the Soviet Union, a literature review has been made on the magnitude of shadow economy and black money in the economy.
While it is true that organised criminal phenomenon brings new challenges academics and professionals, it is not least also creates new opportunities for the development of scientific knowledge. The need to address an increasingly more sophisticated form of organised crime
should stimulate a strong commitment to specialisation of research instruments and transmission of acquired knowledge. Specialisation, in turn, demands necessarily overcoming the insufficient methodological and didactic classics paradigms, opting for innovative and integrated responses necessarily cross (holistic), applied to the analysis and teaching of organised crime. The methodological and didactic challenges on measuring organised crime
are many and varied, and ultimately, criminologists must accept the challenge and give a full answer. In summary, this chapter focuses on the measurement of organised crime
and the need for a quantitative approach; it further proposes and discusses a methodological approach to quantitative data
and development of trustworthy indicators
.
This article considers the mutual interrelationship between informal economies and the wider political economy of capitalism. Four dimensions are discussed: 1 the generation of informal economies as a paradoxical outcome of distinguishing them from capitalism; 2 the support given by capitalism and reciprocated by informal economies that enables each to gain strength from their similarities; 3 the opposition to informal economies that is reflected back on the wider economy; and 4 the destruction capitalism inflicts as it attempts to colonize and co-opt informal economies and the simultaneous transformation of capitalism that occurs with their absorption into the wider structure. The article argues that as a result of these complex interrelations, the development of, and intervention in, informal economies is neither simple nor linear. Failure to take these relations into account can lead to policy and its implementation that produce many unforeseen outcomes.
This innovative book offers targeted strategies for effectively and efficiently teaching economics at both undergraduate and postgraduate levels. It provides professors and other teachers of economics various techniques to engage and retain the interest of students, and challenges them to apply both knowledge and methodological tools to a range of economic problems. © Franklin G. Mixon, Jr and Richard J. Cebula 2014. All rights reserved.
ZET Kayıtdışı ekonomi olgusunun çeşitli boyutlarıyla ele alındığı bu çalışmada, bir ekonomide kayıtdışı ekonominin varlığının yararlı mı, yoksa zararlı mı olduğuna ilişkin görüşler tartışılmaktadır. Türkiye gibi gelişmekte olan ülkelerde ekonominin ciddi oranda kayıtdışı olduğu iddiaları dikkate alındığında, kişi başına gayrisafi yurtiçi hasıla rakamlarının yeniden ayarlanması gereği konunun bir ilginç yönünü oluştururken, bir diğer ilginç yönünü de kayıtdışı ekonomiyi ortadan kaldırmaya çalış-manın yararlı bir şey olup olmayacağı konusu oluşturmaktadır. Bu bağlamda anahtar önem taşıyan nokta, kamu otoritesinin vergi toplamada adil, şeffaf, denetlenebilir ve hesap verebilir davranıp dav-ranmadığı ve nihayet topladığı vergileri nasıl kullandığıdır. Anahtar kelimeler: Kayıtdışı ekonomiyi ölçme yöntemleri, kayıtdışı ekonominin yarar ve zararları. GİRİŞ Kayıtdışı ekonomi alanında yapılan çalışmalar son yıllarda yoğunluk ka-zanmasına karşın, bu konudaki ilk araştırmayı, ABD'nin II.Dünya Savaşı yılların-daki beyan edilmeyen gelirlerini (unreported income) parasal yöntemler ile tahmin etmeye çalışmış olan Cagan yapmıştır (Cagan,1958: 303-328). Bununla birlikte, Gutmann'ın 1977 yılında aynı metodu ABD ekonomisine uygulayarak, ABD'nin kayıtdışı milli gelirini 1976 yılı için 176 milyar dolar, 1977 yılı için ise 195 milyar dolar olarak tespit etmesi ve medyanın konuyu sansasyonel bir şekilde kamuoyuna yansıtması konuya olan ilgiyi arttırmıştır (Ilgın, 1999: 1). Yapılan çalışmalarda kayıtdışı ekonominin boyutları ile ilgili elde edilen sonuçlar, 1 yayınlanan resmi istatistiklere olan güvenin sarsılmasına yol açmış ve ekonomik birimlerin aldığı kararlarda etkili olan bu istatistiklerin gerçeklere çok uzak olabileceği ifade edilmiştir (Mervosh, 1987: 55). Kayıtdışı ekonominin bü-yüklüğünün doğru olarak tahmini, GSMH ve istihdam değerleri gibi makroekono-mik değişkenlerin gerçek değerlerine ulaşılmasını sağlayacak ve bu değişkenler esas alınarak oluşturulacak ekonomik ve sosyal politikaların güvenilirlik ve doğru-luklarını artırarak, uygulamaların başarılı olmasını sağlayacaktır (Temel vd., 1994: 1).
The Annual Social and Economic Supplement to the Current Population Survey measures income and poverty in the United States; a close look into the questionnaire design, data collection and preparation, and postcollection data processing suggests areas for improvement and issues for future research.
This study seeks to investigate the hypothesis that PAC (political action committee) election campaign contributions to U.S. Senate races may reduce the expected benefits of voting and hence voter turnout because the greater the growth of such real PAC contributions, the greater the extent to which eligible voters may become concerned that these contributions lead to PAC political influence over elected officials. Indeed, this study finds for the period 1960-2004 that the aggregate voter participation rate has been negatively impacted by the growth in real PAC contributions to Senate election campaigns, suggesting the need for genuine election campaign finance reform to strengthen and protect the democratic process in the U.S.
The concept of the "informal sector', first introduced in the early 1970s in studies of Africa, has recently gained currency as a tool for understanding the changes under way in the advanced industrial societies. This paper considers this new version of the informal sector idea through a study of a critical case - the "sweatshop' phenomenon in New York's garment industry. Careful scrutiny shows that there is little evidence to support the view that massive and growing numbers of immigrants are employed in a "rising' unregulated, informal sector. Precisely because arguments about informalization in the US lean so heavily on the sweatshop case, the methodology developed here provides a template for other assessments of these claims. -from Authors
This article explores the relationship between the underground economy and state finances by analyzing economic studies within a framework of finances developed by the U.S. Census Bureau. The conclusion drawn is that the underground economy imposes costs on the residents of a state by denying the state vital revenues while simultaneously draining expenditures
This paper examines rates of entrepreneurship over time in the U.S. economy. It finds strong support for the argument that variations in rates of entrepreneurship follow a Schumpeterian model. Changes in rates of entrepreneurship appear to be driven by changes in technology. Some evidence is also found for the effects of the Protestant Ethic, interest rates, prior rates of entrepreneurship, risk-taking propensity, business failure rates, economic growth, immigration, and age distribution of the population.
Economists and policymakers have lauded the adoption of liberal trade policies in many of the emerging markets. From the outside it may appear that governments in these countries have cemented a new set of rules governing economic behavior within their borders. Yet the authors have found that these countries are likely to see the emergence or resurgence of smuggling and contraband distribution in response to trade liberalization. In order to survive under trade liberalization, smugglers will rely on cost savings associated with the circumventing of legal import channels. In addition they may employ violence to bolster a diminished competitive advantage and may seek new illegal sources, both local and international, for the consumer products they distribute. In a market environment in which organized crime competes alongside more legitimate channels of distribution, U.S. multinationals will face new challenges relating to strategic planning, maintaining alliance relationships and corporate control of global brands and pricing.
This pedagogical note develops a model of individual choice and a comprehensible and functionally realistic framework that explains how the size of the underground economy or the extent of aggregate income tax evasion can be estimated. It also describes three models for estimating the size of the underground economy for the U.S. and provides a formal but easily understood analytical model of determinants of the extent of aggregate income tax evasion. The latter model is useful in serving as the basis for empirical estimates of determinants of income tax evasion and is useful in enhancing student understanding economic behavior through student projects.
Two of the most widely used measures of household income in the US are the Bureau of Economic Analysis' personal income and the Census Bureau’s money income. These two statistics originate from different traditions of measurement—personal income from national income accounting and money income from income distribution analysis. Yet, many of the conceptual difficulties in developing guidelines for income distribution statistics are the same or similar to the problems encountered in specifying guidelines for national income accounting.
This paper first considers briefly what is meant by the concept “income” and how the debate about the boundaries defining income has been framed. Then, personal income and money income are compared conceptually and empirically. This comparison highlights certain ways that the two measures differ—in the inclusion or exclusion of lump sum payments, of income of non-profit institutions serving households, and of in-kind payments; in the treatment of pension accruals versus disbursements; and in adjustments for underreporting.
The report identifies constraints and opportunities for the restoration of economic exchange following nuclear war. Four survival scenarios are postulated based on high or low levels of damage to (1) institutions that signal trading opportunities, reduce transaction costs, and regulate and enforce contracts, and (2) resources that are used to create and define wealth. The four scenarios are best case, worst case, resource abundance, and an institution intensive case. Three kinds of literature were reviewed, (1) the economics literature on formal markets, (2) the sociological literature on informal markets, and (3) the economic anthropology literature on pre-capitalist and pre- industrial exchange. From this corpus a set of non-market and market exchange structures are derived and rendered as rules vectors describing their operation. Each of the four survival scenarios is expounded as a subset of the possible exchange structures that is logically compatible with the constraints defining that scenario.
This paper contends that the official poverty estimates of the federal government reflect a conservative bias. The argument is supported mainly by a review of the evidence on the shortcomings of the government's procedures in measuring and estimating poverty. Five limitations of the procedures are highlighted and discussed, and the general conclusion is that the government's approach leads to a substantial under‐estimation of poverty. Given the historical and contemporary government policies toward the poor, there is little reason to be optimistic about any significant change in the government's procedures, unless they are changes that have the effect of further increasing the under‐estimation.
As self-employment and entrepreneurship become increasingly important in our modern economies, Simon C. Parker provides a timely, definitive and comprehensive overview of the field. In this book he brings together and assesses the large and disparate literature on these subjects and provides an up-to-date overview of new research findings. Key issues addressed include: the impact of ability, risk, personal characteristics and the macroeconomy on entrepreneurship; issues involved in raising finance for entrepreneurial ventures, with an emphasis on the market failures that can arise as a consequence of asymmetric information; the job creation performance of the self-employed; the growth, innovation and exit behaviour of new ventures and small firms; and the appropriate role for governments interested in promoting self-employment and entrepreneurship. This book will serve as an essential reference guide to researchers, students and teachers of entrepreneurship in economics, business and management and other related disciplines.
In this paper we review theoretical perspectives on the informal economy that developed during the period 1958–1992. We describe
shifts in thinking in two phases that we identify as ‘first wave studies’ and ‘second wave studies,’ and we identify a series
of critical theoretical issues that emerged from the thinking during these periods. Then, focusing on the state of Michigan,
USA, we examine empirical research that was conducted in the second wave and compare the results with a state survey that
we conducted in 2005. The overall aim of this paper is to summarize the extent of theoretical and empirical studies of informal
economy before the more recent postmodern informed analysis of the 1990s, and to document shifts in patterns of informal economic
activity as this is revealed from the research. We conclude with a discussion of theoretical and empirical questions that
have begun to be addressed in the last 15years of what has now been 50years of research on this topic.
A simple fishery model is developed with legal and illegal markets for fish, the latter market being combated by enforcement efforts put forth by a social regulator. In response to enforcement, violators undertake avoidance activities to escape detection. The possible impacts of illegal activity on optimal fishery management are then explored, and some policy implications are suggested. Concurrently, optimal regulation is calculated when: (a) only legal surplus is maximized versus (b) when both legal and illegal surplus is maximized. The rationale for these two regimes and their divergence in optimal management policies is outlined.
This paper presents a general equilibrium model in which two production sectors - ‘reported’ and ‘unreported’ - compete for scarce resources. The unreported sector permits factor holders and firms to evade their taxes. The impact of factor taxes on employment in the two sectors is analyzed. The paper shows how evasion allows the inelastically supplied factor to shift some of the tax burden onto other factors. That affects the excess burden of various tax instruments and the effectiveness of stricter enforcement. The paper also discusses the efficiency consequences of tax evasion. The analysis shows that the presence of evasion invalidates the tax equivalence principle.
In 1982 the Netherlands Central Bureau of Statistics started large-scale survey research on the supply of hidden labour. As it was not known what type of survey would yield the best results, eight survey variants were tried out. They differed in the medium of communication between the researcher and respondent (face-to-face, mail and telephone) and in interview design (direct approach, gradual approach and ‘free-form’ conversation). Several criteria were used to assess the survey variants on their suitability for obtaining statistical information on the magnitude and structure of the hidden labour market. With respect to non-response and item non-response, face-to-face methods yielded the best results. In combating incorrect responses, a gradual introduction of the topic ‘hidden income’ is to be preferred.
Although in recent years there has been an increased interest in the underground economy, little attention has been paid to the policy implications that may result from the existence of an underground sector of our economy that responds to shifts in government policy. This paper develops a flexible-price macroeconomic model incorporating the underground economy, for the purpose of comparative static analysis. The paper specifically investigates the impact that business cycle movements, and changes in tax and monetary policy, have on the underground economy. The results indicate that the existence of an endogenous underground sector has important implications for the conduct of both fiscal and monetary policy.
Abstract This study empirically investigates the extent of non compliance with the tax code and the determinants of federal income tax evasion in the U.S. Employing the most recent data we find that 18-19% of total reportable income is not properly reported to the IRS, giving rise to a “tax gap” approaching $500 billion dollars. Three time periods are studied, 1960-2008, 1970-2008, and 1980-2008. It is found across study periods that income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, public dissatisfaction with government, and per capita real GDP (adopted as a measure of income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented). Modest evidence of a negative impact of IRS audit rates on tax evasion is also detected.
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