Shadow economy and its relations with tax system and state budget in Poland 1995 - 2007

Stanisław Cichocki

No 2008-05, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: In this paper, results of the research on measurement of shadow economy in Poland in the period 1995 - 2007 are presented. This research is motivated by controversial existing estimates. First, some definitions of shadow economy are reviewed. Then, on the basis of monetary methods, an econometric model for currency demand is built. Using estimation results, the size of shadow economy is assessed. According to these estimates shadow economy declined in the period 1995 – 2007 starting from 40% of GDP in 1995 and reaching about 10% of GDP in 2007. The paper also analyses relations between shadow economy, state budget and tax system. Measures for these relations are discussed and a Vector Autoregressive model is estimated. Impulse Reaction Functions are drawn, showing that an increase in indirect tax burden enlarges shadow economy. A contrary effect arises due to an increase in a) direct tax burden, b) budget balance.

Keywords: shadow economy; tax system; state budget; currency method; VAR (search for similar items in EconPapers)
JEL-codes: H2 H26 O17 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP5.pdf First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2008-05

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