Modelling the Underground Economies in Canada and New Zealand: A Comparative Analysis

Lindsay Tedds and David Giles

No 3, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: Recently there has been a resurgence of interest internationally in measuring the size of the underground economies. This has led to new approaches to this problem, and a more rigorous treatment of the associated time-series issues. In this paper we compare our recent underground economy results for Canada and New Zealand. These results provide time-series measures of the (legally-based plus illegally-based) underground economies in those countries, over similar historical periods, obtained via the same methodology. This methodology involves the estimation of structural MIMIC models, calibrated by estimating nonlinear currency-demand models. In addition to providing the underground economy measures themselves, we also compare the medium-term trends and cyclical characteristics of underground output in these two countries, and their responsiveness to changes in taxation policies. Special attention is paid to the effects on the New Zealand and Canadian underground economies of the Goods and Services Taxes in 1986 and 1991 respectively. These taxes are virtually identical in their design, but the context of their implementation led to quite different impacts on the associated underground economies.

Keywords: underground economy; tax evasion; MIMIC models; goods and services tax (search for similar items in EconPapers)
JEL-codes: C5 H1 H2 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2000-04-14
New Economics Papers: this item is included in nep-cdm
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0003

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