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Discussion Paper Measuring the Size of the Informal Economy: Some Critical Comments

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  • George M. Georgiou

    (Central Bank of Cyprus)

Abstract

There has been a burgeoning number of studies attempting to measure the size of the ‘black’ economy. These are based on a variety of methodologies and provide a range of estimates, not just across countries but within the same countries. This raises a number of issues: What is meant by the term ‘black’ economy? Is it an appropriate description? What is the theory underlying the estimates of informal economic activity? This paper examines these and other issues, and concludes that whilst the existence of what we prefer to call the ‘informal’ economy in most countries is incontrovertible, there is a lack of consensus on the appropriate methodology for estimating its size. More importantly, the large number of studies are simply exercises in measurement without theory, though we are sceptical that even with strong theoretical underpinnings it is possible to provide accurate estimates of a complicated web of informal activities. JEL Classification: E26, H26, K42.

Suggested Citation

  • George M. Georgiou, 2010. "Discussion Paper Measuring the Size of the Informal Economy: Some Critical Comments," Journal of Interdisciplinary Economics, , vol. 23(1), pages 85-107, January.
    • Handle: RePEc:sae:jinter:v:23:y:2010:i:1:p:85-107
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    More about this item

    Keywords

    Informal economy; taxation; criminal activities;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • 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

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