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Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions

Author

Listed:
  • Schneider, Friedrich

    (University of Linz)

  • Buehn, Andreas

    (Institute for Advanced Sustainability Studies (IASS))

Abstract
This paper presents various methods for estimating the size of the shadow economy and analyzes their strengths and weaknesses. The purpose of the paper is twofold. Firstly, it demonstrates that no ideal method exists to estimate the size and development of the shadow economy. Because of its flexibility, the MIMIC method used to get macro-estimates of the size of the shadow economy is discussed in greater detail. Secondly, the paper focuses on the definition and causal factors of the shadow economy and provides a comparison of the size of the shadow economy using different estimation methods.

Suggested Citation

  • Schneider, Friedrich & Buehn, Andreas, 2016. "Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions," IZA Discussion Papers 9820, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9820
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    More about this item

    Keywords

    advantages and disadvantages of the measurement methods; methods to estimate the shadow economy; MIMIC approach; shadow economy estimates;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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