Essays on the Shadow Economy

Abstract

(1)Recently a few studies focus on the relationship between income inequality and the shadow economy and some explore the impact of the shadow economy on income inequality based on OLS regressions However the non-observed country-specific effect and potential endogeneity may cause the results to be biased This paper utilizes panel data from 1999 to 2005 for at most 83 countries and employ fixed effect model and GMM method to overcome this shortcoming The main finding is the shadow economy has a significantly positive effect on income inequality especially in developing countries (2)Shadow economy is a worldwide important economic phenomenon affecting public sectors’ abilities to collect fiscal resources Understanding the causes of shadow economy could help the government make reasonable policy to reduce the size of shadow economy and then improve the capacity of tax collection This paper focuses on Taiwan’s case and employs both standard OLS and VAR model to estimate the impacts of various kinds of specific taxes and other variables on Taiwan’s shadow economy The results show that business tax has significant positive effect which implies that a government should consider a business tax reduction to reduce the size of shadow economy because this way is least costly

Date of Award	2014 Jun 23
Original language	English
Supervisor	Chun-Li Tsai (Supervisor)