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Indirect or Macroeconomic Methods in Measuring the Informal Economy

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  • Nezhyvenko, O.

    (National University of Kyiv-Mohyla Academy, Ukraine)

Abstract

This paper aims to define and classify indirect methods of measuring the informal economy in broad. These are macroeconomic methods that are widely utilized to capture what is regarded as hidden from the official Gross Domestic Product. More particularly, the methods such as electricity consumption method, income-expenditure difference method, currency demand method, labour force participation rate, labour input method and structural (MIMIC) model are explained. Finally, a comparison of the five macroeconomic methods is demonstrated for the European Union countries. The paper concludes that the countries with the highest share of the informal economy are Greece, Cyprus, Romania, Bulgaria, Croatia, Italy and Latvia. The countries with the lowest informal economy are Austria, the United Kingdom, the Netherlands, Sweden and Luxembourg.

Suggested Citation

  • Nezhyvenko, O., 2019. "Indirect or Macroeconomic Methods in Measuring the Informal Economy," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 8(4), pages 201-215, December.
    • Handle: RePEc:ods:journl:v:8:y:2019:i:4:p:201-215
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    More about this item

    Keywords

    informal economy; non-observed economy; shadow economy; indirect methods;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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