An Analysis of the Underground Economy and its Macroeconomic Consequences
By:Ms.Era Dabla-Norris
Published on 2003-01-01 by International Monetary Fund
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.
This Book was ranked at 232 by Google Books for keyword International Taxes.
Book ID of An Analysis of the Underground Economy and its Macroeconomic Consequences's Books is 4E8YEAAAQBAJ, Book which was written by "Ms.Era Dabla-Norris" have ETAG "ZovqsWWlNSw"
Book which was published by International Monetary Fund since 2003-01-01 have ISBNs, ISBN 13 Code is 1451844069 and ISBN 10 Code is 9781451844061
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