Shadow Economy Macroeconomic Analysis icon

Shadow Economy Macroeconomic Analysis




НазваShadow Economy Macroeconomic Analysis
Дата29.06.2013
Розмір445 b.
ТипДокументи


Shadow Economy

  • Macroeconomic Analysis,

  • Topic 3


Central Idea and Keywords

  • Central Idea:

  • What is the Shadow Economy?

  • How it could be evaluated?

  • How to minimize it?

  • Keywords:

  • Definitions: household sector, informal sector, hidden sector; Laffer curve; shadow economy “golden rule”

  • Measuring shadow economy: sample survey method, tax auditing; discrepancy between national expenditure and income, currency demand approach, Kaufmann-Kaliberda method, Lasko method.



Lecture Plan

  • Shadow economy: Definitions and Classifications

  • Shadow economy worldwide:

  • EU and USA

  • Ukraine

  • Measuring shadow economy:

  • Direct methods

  • Indirect methods



Literature:

  • Mandatory:

  • Сокотельник М. (1997) Податково-бюджетна політика та тіньова економіка в Україні

  • Schneider, F. and D.Enste (2000) Shadow Economies Around the World: Size, Causes, and Consequences. //IMF Working Paper WP/00/26. – p. 7, 10, 11, 30-38.



Lecture Plan

  • Shadow economy: Definitions and Classifications

  • Shadow economy worldwide:

  • EU and USA

  • Ukraine

  • Measuring shadow economy:

  • Direct methods

  • Indirect methods



Definitions and Classifications

  • Household sector (сектор домогосподарств)

  • Goods and services produced by a household are consumed within the household

  • Absence of market transactions (excluded from GDP)

  • Transition economies: in-a-village planting and harvesting

  • Informal sector

  • Statistical agencies have failed to develop a methodology assessing valued added of those activities

  • Goods and services are legal; their distribution does not violate the law

  • Hidden sector

  • Deliberate violation of the law

  • Goods and services are officially permitted; however, their distribution is illegal



Shadow versus Criminal Economy



Lecture Plan

  • Shadow economy: Definitions and Classifications

  • Shadow economy worldwide:

  • EU and USA

  • Ukraine

  • Measuring shadow economy:

  • Direct methods

  • Indirect methods



Shadow economy worldwide

  • Shadow economy magnitude:

  • USA, Canada, France – 10-13%

  • Denmark, Sweden – 11-17% (further details – Schneider and Enste, p.11)

  • Latin America – 30% (further details – Schneider and Enste, p.7)

  • Ukraine (1990s) – 67% (further details – Schneider and Enste, p.10); UA (nowadays) – about 30-37%

  • Shadow economy “Golden Rule”:

  • A moderate increase in official GDP clearly exhibits escalation of the shadow economy



Shadow economy minimization: USA

  • Tax reforms of 1960s and 1980s:

  • income profit tax decreased from 50% to 28%

  • corporate profit tax flagged from 48% to 34%

  • abolished taxation of profits from government bonds and corporate securities

  • The share of tax revenues to GDP decreased from 30% (1980) to 28.7% (1985)

  • Outcomes:

  • Investment boom: American firms aggressively invested in EU bond and securities (direct and portfolio investments)

  • Huge capital inflow from EU to the US (flag of budget deficit)



Shadow economy minimization - France

  • Industry restructuring:

  • Tax preferences (obsolete equipment amortization)

  • Government subsidies (equipment modernization)

  • Massive government investments in R&D

  • Tax reform:

  • Income profit tax decreased from 50% to 45%

  • VAT flagged from 33% to 28%

  • Tax privileges to “infant” (newly established) firms

  • Outcomes:

  • Late 1980s – 1990s - investment boom

  • 87% of R&D investments – domestic funding



Laffer Curve



Lecture Plan

  • Shadow economy: Definitions and Classifications

  • Shadow economy worldwide:

  • EU and USA

  • Ukraine

  • Measuring shadow economy:

  • Direct methods

  • Indirect methods



Shadow economy worldwide: Ukraine

  • Read yourself

  • (Сокотельник М.)

  • Consider indicators that implicitly reveal shadow economy fluctuations in late 1990s – 2000s



Lecture Plan

  • Shadow economy: Definitions and Classifications

  • Shadow economy worldwide:

  • EU and USA

  • Ukraine

  • Measuring shadow economy:

  • Direct methods

  • Indirect methods



Direct (microeconomics) methods

  • Sample Survey method

  • Tax Auditing method

  • Read yourself (Schneider and Enste)

  • Be ready to discuss:

  • The essence of each method

  • Advantages and disadvantages of the method



Indirect (macroeconomics) methods

  • Discrepancy between National Expenditure and National Income

  • Discrepancy between Official and Real Labor Force

  • (read Schneider and Enste)

  • Currency Demand Approach

  • Kaufmann-Kaliberda method (read Schneider and Enste)

  • Lasko method



Discrepancy between National Expenditures and National Income

  • Income-based GDP = Expenditure-based GDP

  • Thus:

  • National Expenditure – National Income = Shadow Economy

  • In reality:

  • National Expenditure – National Income =

  • = Shadow Economy + Statistical Data Discrepancy

  • Since official institution in UA tend to “polish” the data on national expenditures and national income, it is only the “insider” data of Ministry of Economy or Ministry of Statistics that makes sense to use



Currency Demand Approach (widely used for EU countries)

  • Assumption: shadow economy is served using cash only

  • ln (C/M2)t=a0+a1ln(1+TW) t+a2ln(WS/Y) t+a3lnR t+a4ln(Y/N) t+ut,

  • where

  • C/M2 - ratio of currency (cash, demand deposits, small-denomination time deposits) to M2

  • TW - weighted average tax rate (tax burden)

  • WS/Y - ratio of wages to national income (influence of wage increase on cash)

  • R - interest rate on deposits (opportunity cost of using cash)

  • Y/N – per capita national income

  • a1>0, a2>0, a3<0, a4>0



Currency Demand Approach (widely used for EU countries)

  • Drawbacks of the method:

  • Shadow economy payments are not limited to currency only: barter and promissory notes (вескелі) are widespread

  • Tax burden is not the one and only source of shadow economy: regulatory burden, tax moral, and trust to the state are also important

  • In western economies

  • currency = cash + demand deposits + small-denomination time deposits

  • Increase in demand deposits and small-denomination time deposits does not necessarily mean rise in shadow economy

  • It might also reflect decline of time and saving deposits



Lasko method

  • Shadow economy is related to electricity consumed by households (e.g. use of vacuum cleaner, iron, electric stove etc.)

  • ln Ei = a1lnCi + a2lnPRi + a3Gi + a4Qi + a5Hi + u i,

  • Hi = β1Ti + β2(Si - Ti)+ β3Di + e i,

  • Ei - per capita electricity consumption

  • Ci - per capita consumption of households (in real prices)

  • PRi - households’ price of 1kw

  • Gi - quantity of months when central heating is used

  • Qi - per cent of alternative energy sources used within a household

  • Hi - per capita shadow GDP (per cent)

  • Ti - ratio of direct and indirect taxes to GDP

  • Si - ratio of “social” expenditures (pensions, social security payments) to GDP

  • Di - quantity of dependants above 14 years old per 100 employees

  • a1>0, a2<0, a3>0, a4<0, a5>0; β1>0, β2<0, β3>0



Lasko method

  • Drawbacks of the method:

  • Certain households’ activities are not related to electricity use

  • Households are not the only consumers of electricity

  • “Social” expenditures is inadequate measure of economic activities in developing and transition economies



Схожі:

Shadow Economy Macroeconomic Analysis iconPrivatization in uk macroeconomic Analysis

Shadow Economy Macroeconomic Analysis iconMacroeconomic Analysis Maria Vyshnya

Shadow Economy Macroeconomic Analysis iconPrivatization in Ukraine Macroeconomic Analysis

Shadow Economy Macroeconomic Analysis iconForeign Direct Investments (fdi) Macroeconomic Analysis
Білоцерковський О. та ін. Інвестування в Україні як процес відбору. // Welcome. 2002, №7. с. 3-6
Shadow Economy Macroeconomic Analysis iconSoft Budget Constraints Macroeconomic Analysis
Легейда Н. Непрямі субсидії в Україні… Rodrik D. Industrial Policy for the Twenty-First Century
Shadow Economy Macroeconomic Analysis iconAnalysis of pharmacies financial condition analysis of financial stability financial stability of the enterprise

Shadow Economy Macroeconomic Analysis iconMacroeconomic problems The role of the social sphere in the reproduction of human capital

Shadow Economy Macroeconomic Analysis iconApplication form for the Third International Summer School in Social Sciences in Ukraine «Soviet legacies and post-Soviet practices: economy, politics, everyday life»
«Soviet legacies and post-Soviet practices: economy, politics, everyday life»
Shadow Economy Macroeconomic Analysis iconCurriculum #14 Speciality: Economy of enterprise

Shadow Economy Macroeconomic Analysis iconReliability analysis of a structure

Додайте кнопку на своєму сайті:
Документи


База даних захищена авторським правом ©zavantag.com 2000-2013
При копіюванні матеріалу обов'язкове зазначення активного посилання відкритою для індексації.
звернутися до адміністрації
Документи