Working Paper Series
Edgar L. Feige and Robert T. McGee
Sweden’s Laffer Curve: Taxation and the Unobserved Economy
Abstract: Recent research on the unobserved economy suggests that
the phenomenon has important implications for both macroeconomic policy and
public finance. This paper focuses attention on the public finance
implications by developing a simple macro-model from which it is possible
to derive a Laffer curve. The model reveals that the shape and position of
the Laffer curve depend upon the strength of supply side effects, the
progressivity of the tax system and the size of the unobserved economy.
Using alternative parameterizations of each of these effects, it is
possible to obtain rough empirical estimates of the Laffer curve for
Keywords: Taxation; Public finance; Laffer curve; (follow links to similar papers)
JEL-Codes: E60; H20; (follow links to similar papers)
34 pages, June 1983
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