Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio

Ercolani, Marco

doi:10.5018/economics-ejournal.ja.2007-6

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Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio

Marco Ercolani

University of Birmingham - Department of Economics

2007

Economics: The Open-Access, Open-Assessment E-Journal, Vol. 1, 2007-6

Abstract:
Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result. --

Number of Pages in PDF File: 32

Keywords: inflation tax, hidden/shadow/underground economy, seigniorage

JEL Classification: O17, H21, E52, E31

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Date posted: December 18, 2010

Suggested Citation

Ercolani, Marco, Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio (2007). Economics: The Open-Access, Open-Assessment E-Journal, Vol. 1, 2007-6. Available at SSRN: http://ssrn.com/abstract=1726798 or http://dx.doi.org/10.5018/economics-ejournal.ja.2007-6

Contact Information

Marco Ercolani (Contact Author)

University of Birmingham - Department of Economics ( email )

Birmingham, B15 2TT
United Kingdom