Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio

Marco Ercolani

No 2007-10, Economics Discussion Papers from Kiel Institute for the World Economy

Abstract: Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result.

Keywords: inflation tax; hidden/shadow/underground economy; seigniorage (search for similar items in EconPapers)
JEL-codes: E31 E52 H21 O17 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-mac and nep-pbe
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https://www.econstor.eu/bitstream/10419/17933/1/dp2007-10.pdf (application/pdf)

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Journal Article: Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:5524

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