The shadow economy in Norway: Demand for currency approach

Isilda Shima
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Isilda Shima: Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway
Authors registered in the RePEc Author Service: Isilda Mara ()

No 10/2004, Memorandum from Oslo University, Department of Economics

Abstract: The main purpose of this study is to measure the level of the shadow economy in Norway following the demand for currency approach. The question analysed is how well does this approach capture the level of shadow economy in front of a decreasing level of currency in circulation and an increasing use of electronic payment system. In this study is found a decreasing level of the shadow economy in Norway since mid 1990s starting with 8,8 percent of the shadow economy relative to GDP in 1991, up to 10.2 percent in 1995 and there after declining to a level of 5.6 percent of GDP in 2002. The explanation for the decline of the level of shadow economy relative to GDP could be the fact of a decreasing demand for currency for transaction going along with an increase of electronic payments instruments. Also, in Norway, a broad tax reform was implemented in 1992 with the purpose of reducing tax-induced distortions by lowering the tax rates and broadening the tax base. One of the main causes of the shadow economy, is considered to be the burden of direct and indirect tax to the individuals, but the complexity of the tax system is also an important factor that may have an impact on the level of shadow economy.

Keywords: Tax evasion; shadow economy; currency demand; econometrics (search for similar items in EconPapers)
JEL-codes: C22 E41 H26 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-10-26
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The Shadow Economy in NorwayDemand for Currency Approach (2005)
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