International Comparsions of Household Saving Rates and Hidden Income

Activity: Talk or presentationScience to science

Description

In this paper, it is argued that shadow activities and different levels of marketization of household production systematically distort international comparisons of aggregate gross household saving rates (HSR): Higher shares of hidden income increase observed HSR. Cross-sectional data for eighteen(twenty-four) countries covering a period of a decade show that gross HSR are positively related to the degree of corruption (used as a proxy of the
propensity to shift economic activities into the shadow) and to the share of income from property and self-employment. They are negatively related to the female employment rate, the ratio of indirect taxes to direct taxes and to the tax wedge. A plausible story behind these phenomena might be that unobserved consumption and ‘wages’ in the black labor market induce an upward bias of observed HSR and profit shares, while the price level effects of a higher share of indirect taxes and a ‘welfare state’ effect lower observed HSR. As expected, the female employment rate (used as an indicator of marketization) is negatively related to household saving rates.
Period23 Jul 200926 Jul 2009
Event titleShadow Economy, Tax Evasion & Sozial Norms
Event typeUnkonwn
Degree of RecognitionInternational