An Analysis of the Underground Economy and its Macroeconomic Consequences /

This paper develops a dynamic computable general equilibrium model in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the absence of...

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Detalles Bibliográficos
Autor principal: Dabla-Norris, Era
Otros Autores: Feltenstein, Andrew
Formato: Revista
Lenguaje:English
Publicado: Washington, D.C. : International Monetary Fund, 2003.
Colección:IMF Working Papers; Working Paper ; No. 2003/023
Acceso en línea:Full text available on IMF
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245 1 3 |a An Analysis of the Underground Economy and its Macroeconomic Consequences /  |c Era Dabla-Norris, Andrew Feltenstein. 
264 1 |a Washington, D.C. :  |b International Monetary Fund,  |c 2003. 
300 |a 1 online resource (26 pages) 
490 1 |a IMF Working Papers 
500 |a <strong>Off-Campus Access:</strong> No User ID or Password Required 
500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a This paper develops a dynamic computable general equilibrium model in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the absence of budgetary flexibility to adjust expenditures, raising tax rates too high drives firms into the underground economy, thereby reducing the tax base. Aggregate investment in the economy is lowered because of credit rationing. Taxes that are too low eliminate the underground economy, but result in unsustainable budget and trade deficits. Thus, the optimal rate of taxation, from a macroeconomic point of view, may lead to some underground activity. 
538 |a Mode of access: Internet 
700 1 |a Feltenstein, Andrew. 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2003/023 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2003/023/001.2003.issue-023-en.xml  |z IMF e-Library