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In the Shadow of Public Debt: Are there Relations between Public Debt and the Shadow Economy?

Author

Listed:
  • Aloys Prinz

    (Institute of Public Economics II, University of Münster, 48143 Münster, Germany)

  • Hanno Beck

    (Hochschule Pforzheim University, 75175 Pforzheim, Germany)

Abstract

The question of this paper is whether there is a relation between the size of the shadow economy, the inflation tax and the debt-to-GDP ratio. This relationship is relevant for an understanding of sovereign debt crisis in a currency union due to the loss of a national inflation tax and due to tax evasion as a consequence of sizeable shadow economies. In this paper, empirical evidence is presented for the effect of the size of the shadow economy on the debt-to-GDP ratio as well as for the debt-increasing effect of the start of the European Monetary Union in 1999.

Suggested Citation

  • Aloys Prinz & Hanno Beck, 2012. "In the Shadow of Public Debt: Are there Relations between Public Debt and the Shadow Economy?," Economic Analysis and Policy, Elsevier, vol. 42(2), pages 221-236, September.
    • Handle: RePEc:eee:ecanpo:v:42:y:2012:i:2:p:221-236
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    Citations

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    Cited by:

    1. Tran, My Thi Ha, 2021. "Public Sector Management And Corruption In Asean Plus Six," OSF Preprints stxw4, Center for Open Science.
    2. Mazhar, Ummad & Méon, Pierre-Guillaume, 2017. "Taxing the unobservable: The impact of the shadow economy on inflation and taxation," World Development, Elsevier, vol. 90(C), pages 89-103.
    3. Novkovska, Blagica, 2016. "How Strongly The Hidden Economy Of A Small Country Can Be Influenced By Drastic Events: Case Of Macedonia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 187-195.
    4. Mara, Eugenia Ramona & Maran, Raluca, 2024. "Are fiscal rules efficient on public debt restraint in the presence of shadow economy?," Finance Research Letters, Elsevier, vol. 64(C).
    5. Novkovska, B. & Novkovski, N., 2018. "Energy consumption and hidden economy in Macedonia: Causes and responses," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 166-181.
    6. repec:prg:jnlpep:v:preprint:id:662:p:1-20 is not listed on IDEAS
    7. Lucia Mihóková & Radovan Dráb & Andrea Kralik, 2018. "Assessing the Impact of Tax Evasion on Long-Term Fiscal Imbalance: A Sensitivity Analysis Application," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(3), pages 331-350.

    More about this item

    Keywords

    public debt; shadow economy; inflation tax; EMU;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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