Nonparametric expenditure-based estimation of income under-reporting and the underground economy

Lindsay Tedds

Department of Economics Working Papers from McMaster University

Abstract: There is considerable interest in measuring the underground economy using microeconomic data. One such method estimates income under-reporting by households by assuming a known, parametric form of the Engel curve and making the further parametric assumption that households under-report their income by a constant fraction, independent of income. This paper proposes a nonparametric approach which avoids functional form restrictions and enables the reporting function to vary across income levels and household characteristics. I illustrate by estimating the effect of the Canadian Goods and Services Tax on income under-reporting.

JEL-codes: C14 D12 O17 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2004
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2004-17

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