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What causes the hidden economy in Spain?

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  • Jose Maria Serrano
  • Maria Dolores Gadea

Abstract

Estimating the size of the hidden economy continues to attract the interest of both researchers and politicians alike. However, and despite the recent increase in the technical sophistication of the two estimation methods most commonly employed in the empirical literature, namely the monetary approach and the multiple causes-indicators technique, it is necessary to continue making advances in our knowledge of the relationships between the hidden economy and its economic and institutional environment. Against this background, this paper sets out to provide empirical evidence on this question. Using the estimation made by Gadea and Serrano (2001) of hidden income in Spain during the period 1964--1998, a univariate and multivariate causality analysis is carried out between hidden income and the representative variables of the legal economy, taxation, the labour market and currency. The results allow one to draw a number of interesting conclusions on the complexity of these relationships.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

Volume (Year): 1 (2005)
Issue (Month): 3 (May)
Pages: 143-150

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Handle: RePEc:taf:apfelt:v:1:y:2005:i:3:p:143-150

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References

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  1. Frank Atkins, 1999. "Macroeconomic time series and the monetary aggregates approach to estimating the underground economy," Applied Economics Letters, Taylor & Francis Journals, vol. 6(9), pages 609-611.
  2. David E. A. Giles, 1998. "Modelling the Hidden Economy and the Tax-Gap in New Zealand," Econometrics Working Papers 9810, Department of Economics, University of Victoria.
  3. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  4. Frey, Bruno S & Weck, Hannelore, 1983. "Estimating the Shadow Economy: A 'Naive' Approach," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 23-44, March.
  5. Juan Carlos Conesa & Carlos Diaz Moreno & Jose Enrique Galdon Sanchez, 1997. "Underground economy and aggregate fluctuations," Working Papers in Economics 17, Universitat de Barcelona. Espai de Recerca en Economia.
  6. David Giles, 1997. "Causality between the measured and underground economies in New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 63-67.
  7. Namkee Ahn & Sara La De Rica, 1997. "The underground economy in Spain: an alternative to unemployment?," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 733-743.
  8. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
  9. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
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Cited by:
  1. Michael Pickhardt & Jordi Sardà, . "Size and causes of the underground economy in Spain: A correction of the record and new evidence from the MCDR approach," Working Papers 201280, Institute of Spatial and Housing Economics, Munster Universitary.

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