The Effect of Transparency Policies on Shadow Economy: Measurement and Evidence from Korea
DOI:
https://doi.org/10.6000/1929-7092.2018.07.29Keywords:
Shadow economy, transparency policy, credit card, cash payment receipt, quantity theory of money identity.Abstract
This paper provides a new and simple methodology to examine the relative size of the shadow economy to the official one using the quantity theory of money identity. We measure the shadow economy size in Korea annually. The Korean government has implemented various transparency policy measures to identify the tax source in commercial transactions. We find significant evidence that credit card encouragement and the cash payment receipt system have a negative effect on the shadow economy size.
References
Bajada, Christopher, and Friedrich Schneider (2005). The Shadow Economies of the Asia-Pacific. Pacific Economic Review 10: 379-401.
https://doi.org/10.1111/j.1468-0106.2005.00280.x
Breusch, Trevor (2005). Estimating the Underground Economy using MIMIC Models, Unpublished manuscript, Australian National University.
Cebula, Richard, 2014, Where Has the Currency Gone? And Why? The Underground Economy and Personal Income Tax Evasion in the U.S., 1970-2008, MPRA Paper No. 55284.
Cagan, Phillip (1958). The demand for currency relative to the total money supply. Journal of Political Economy 66: 303-328.
https://doi.org/10.1086/258056
Fleming, Matthew H., John Roman, and Graham Farrel (2000). The Shadow Economy. Journal of International Affairs 53: 387-409.
Feige, Edgar L., 1989, The Underground Economies: Tax Evasion and Information Distortion, Cambridge University Press.
https://doi.org/10.1017/CBO9780511571749
Feige, Edgar L., 1979, How big is irregular economy, Challenge Journal 22: 5-13.
https://doi.org/10.1080/05775132.1979.11470559
Helberger, Christof, and Helmut Knepel (1988). How Big is the Shadow Economy? A ReAnalysis of the Unobserved-Variable Approach of B.S. Frey and H.Weck-Hannemann. European Economic Review 32: 965-976.
https://doi.org/10.1016/0014-2921(88)90055-4
Hill, Roderick (2002). The Underground Economy in Canada: Boom or Bust? Canadian Tax Journal 50: 1641-1654.
Newey, Whitney K., and Kenneth D. West (1987). A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica 55: 703–708.
https://doi.org/10.2307/1913610
Porter, Richard D., and Gretchen C. Weinbach (1999). Currency ratios and U.S. underground economic activity. Economics Letters 63: 355-361.
https://doi.org/10.1016/S0165-1765(99)00035-X
Schneider, Friedrich (2005). Shadow Economies around the World: what do we really know? European Journal of Political Economy 21: 598-642.
https://doi.org/10.1016/j.ejpoleco.2004.10.002
Schneider, Friedrich, and Dominik H. Enste (2002). The Shadow Economy: Theoretical approaches, empirical studies, and political implications. Cambridge, Cambridge University Press.
Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro (2010). Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007. World Bank Policy Research Working Paper No. 5356.
Schneider, Friedrich (2018). Size, Causes and Consequences of the Underground Economy: an international perspective. Routledge.
Smith, Roger S. (2002). The Underground Economy: Guidance for Policy Makers? Canadian Tax Journal 50: 1655-1661.
Tanzi, Vito (1983). The Underground Economy in the United State: Annual Estimates, 1930-1980. IMF Staff Paper: Vol. 30, 283-305.
https://doi.org/10.2307/3867001
Tanzi, Vito (1986). The Underground Economy in the United State: Reply to Comments by Feige, Thomas and Zilberfarb. IMF Staff Paper, Vol. 33: 799-811.
https://doi.org/10.2307/3867219
Tedds, Lindsay M., and David E.A. Giles (2002). Response to Breusch's Critique. Canadian Tax Journal 53: 392-395.
Thomas, Jim (1999). Quantifying the Black Economuy: 'Measurement without Theoruy' Yet Again? Economic Journal 109: 381-389.
https://doi.org/10.1111/1468-0297.00441
Pickhardt, Michael, and Jordi Sardà Pons (2006). Size and scope of the underground economy in Germany. Applied Economics 38: 1707-1713.
https://doi.org/10.1080/00036840500426868
Korean References
Choi, K. (1987). Study on the shadow economy in Korea. KERI Report, Korea Economy Research Institute.
Kim, B., C. Chung, and M. Park (2008). Shift of Engel Curve for the Self-Employed and Income Under-Reporting. KYOUG JE HAK YON GU 56: 151-170.
Moon, C.G., and J.W. Park (1999). Measurement of Shadow Economy Size in Korea and OECD Countries, KDI Report, Korea Development Institute.
Moon, C.G., and J.W. Park (2002). Estimation of Shadow Economy in OECD Countries: Applications of MIMIC. International Journal of Policy Studies 11: 45-65.
Park, M. (2010). The Analysis of Tax Evasion of Household with Private Business, Monthly Public Economics Forum 165. Korea Institute of Public Finance, 6-25.
Sung, M.J. (2008). Estimation of Business Income Reporting Rate and Related Tax Evasion. Korean Journal of Public Finance 1, 155-188.
https://doi.org/10.1111/j.1468-0106.2005.00280.x
Breusch, Trevor (2005). Estimating the Underground Economy using MIMIC Models, Unpublished manuscript, Australian National University.
Cebula, Richard, 2014, Where Has the Currency Gone? And Why? The Underground Economy and Personal Income Tax Evasion in the U.S., 1970-2008, MPRA Paper No. 55284.
Cagan, Phillip (1958). The demand for currency relative to the total money supply. Journal of Political Economy 66: 303-328.
https://doi.org/10.1086/258056
Fleming, Matthew H., John Roman, and Graham Farrel (2000). The Shadow Economy. Journal of International Affairs 53: 387-409.
Feige, Edgar L., 1989, The Underground Economies: Tax Evasion and Information Distortion, Cambridge University Press.
https://doi.org/10.1017/CBO9780511571749
Feige, Edgar L., 1979, How big is irregular economy, Challenge Journal 22: 5-13.
https://doi.org/10.1080/05775132.1979.11470559
Helberger, Christof, and Helmut Knepel (1988). How Big is the Shadow Economy? A ReAnalysis of the Unobserved-Variable Approach of B.S. Frey and H.Weck-Hannemann. European Economic Review 32: 965-976.
https://doi.org/10.1016/0014-2921(88)90055-4
Hill, Roderick (2002). The Underground Economy in Canada: Boom or Bust? Canadian Tax Journal 50: 1641-1654.
Newey, Whitney K., and Kenneth D. West (1987). A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix. Econometrica 55: 703–708.
https://doi.org/10.2307/1913610
Porter, Richard D., and Gretchen C. Weinbach (1999). Currency ratios and U.S. underground economic activity. Economics Letters 63: 355-361.
https://doi.org/10.1016/S0165-1765(99)00035-X
Schneider, Friedrich (2005). Shadow Economies around the World: what do we really know? European Journal of Political Economy 21: 598-642.
https://doi.org/10.1016/j.ejpoleco.2004.10.002
Schneider, Friedrich, and Dominik H. Enste (2002). The Shadow Economy: Theoretical approaches, empirical studies, and political implications. Cambridge, Cambridge University Press.
Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro (2010). Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007. World Bank Policy Research Working Paper No. 5356.
Schneider, Friedrich (2018). Size, Causes and Consequences of the Underground Economy: an international perspective. Routledge.
Smith, Roger S. (2002). The Underground Economy: Guidance for Policy Makers? Canadian Tax Journal 50: 1655-1661.
Tanzi, Vito (1983). The Underground Economy in the United State: Annual Estimates, 1930-1980. IMF Staff Paper: Vol. 30, 283-305.
https://doi.org/10.2307/3867001
Tanzi, Vito (1986). The Underground Economy in the United State: Reply to Comments by Feige, Thomas and Zilberfarb. IMF Staff Paper, Vol. 33: 799-811.
https://doi.org/10.2307/3867219
Tedds, Lindsay M., and David E.A. Giles (2002). Response to Breusch's Critique. Canadian Tax Journal 53: 392-395.
Thomas, Jim (1999). Quantifying the Black Economuy: 'Measurement without Theoruy' Yet Again? Economic Journal 109: 381-389.
https://doi.org/10.1111/1468-0297.00441
Pickhardt, Michael, and Jordi Sardà Pons (2006). Size and scope of the underground economy in Germany. Applied Economics 38: 1707-1713.
https://doi.org/10.1080/00036840500426868
Korean References
Choi, K. (1987). Study on the shadow economy in Korea. KERI Report, Korea Economy Research Institute.
Kim, B., C. Chung, and M. Park (2008). Shift of Engel Curve for the Self-Employed and Income Under-Reporting. KYOUG JE HAK YON GU 56: 151-170.
Moon, C.G., and J.W. Park (1999). Measurement of Shadow Economy Size in Korea and OECD Countries, KDI Report, Korea Development Institute.
Moon, C.G., and J.W. Park (2002). Estimation of Shadow Economy in OECD Countries: Applications of MIMIC. International Journal of Policy Studies 11: 45-65.
Park, M. (2010). The Analysis of Tax Evasion of Household with Private Business, Monthly Public Economics Forum 165. Korea Institute of Public Finance, 6-25.
Sung, M.J. (2008). Estimation of Business Income Reporting Rate and Related Tax Evasion. Korean Journal of Public Finance 1, 155-188.
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Published
2018-10-03
How to Cite
Binh, K. B., Park, M.-H., & Woo, S. (2018). The Effect of Transparency Policies on Shadow Economy: Measurement and Evidence from Korea. Journal of Reviews on Global Economics, 7, 337–344. https://doi.org/10.6000/1929-7092.2018.07.29
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