This study contributes to the debate on estimating the size of underground economy, by proposing a reinterpretation of the Currency Demand Approach (CDA). Three main innovations are introduced. First, a direct measure of cash transactions is taken as dependent variable in the money demand equation. Second, indicators of detected tax evasion substitute difficult-to-find proxies for all the relevant determinants of noncompliance. Third, a control for cash used in criminal activities is introduced. The application of this ‘modified- CDA’ to Italian provinces reveals that the provinces in Centre- North exhibit a higher incidence on GDP of both the underground economy and illegal production.
L'economia non osservata fra evasione e crimine: una rivisitazione del Currency Demand Approach con una applicazione al contesto italiano
PETRAGLIA, Carmelo;
2013-01-01
Abstract
This study contributes to the debate on estimating the size of underground economy, by proposing a reinterpretation of the Currency Demand Approach (CDA). Three main innovations are introduced. First, a direct measure of cash transactions is taken as dependent variable in the money demand equation. Second, indicators of detected tax evasion substitute difficult-to-find proxies for all the relevant determinants of noncompliance. Third, a control for cash used in criminal activities is introduced. The application of this ‘modified- CDA’ to Italian provinces reveals that the provinces in Centre- North exhibit a higher incidence on GDP of both the underground economy and illegal production.File | Dimensione | Formato | |
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