Economics: The Open-Access, Open Assessment E-Journal http://www.economics-ejournal.org en Marco G. Ercolani Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio 2007-03-12 Differential tax analysis is used to show how the socially optimal fiscal-tax to liquidity-tax ratio changes with the relative size of the tax-evading hidden economy. The smaller the relative size of the hidden economy, the larger the optimal fiscal-tax to liquidity-tax ratio. The empirical cross-section and panel evidence supports this theoretical result. http://www.economics-ejournal.org/economics/discussionpapers/2007-10 JEL E31 JEL E52 JEL H21 JEL O17