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Estimating the size of Turkey's informal sector: an expenditure-based approach


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  • Nurhan Davutyan


Accurately measuring Turkey's informal sector is important for policymaking. We utilize household income-expenditure surveys to examine this sector's income underreporting. The Pissarides-Weber approach hypothesizes that data would reflect such underreporting as “excess food consumption”. Our results suggest informal sector members spend more than their formal sector counterparts with comparable reported income levels. Using this information, we estimate the average size of the true informal sector to be about 1.25 times the official estimate. The informal sector accounts for around 83% of officially reported disposable income. Therefore, true Turkish disposable income is (25%)*(83%), roughly 21% larger than the officially estimated magnitude.

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Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 11 (2008)
Issue (Month): 4 ()
Pages: 261-271

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Handle: RePEc:taf:jpolrf:v:11:y:2008:i:4:p:261-271

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Keywords: informal economy; tax evasion; Engel's Law;

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Cited by:
  1. Roberto Dell'Anno & Ferda Halicioglu, 2010. "An ARDL model of unrecorded and recorded economies in Turkey," Journal of Economic Studies, Emerald Group Publishing, vol. 37(6), pages 627-646, September.
  2. Huby, Bertrand, 2009. "Restaurations des fondamentaux économiques, réformes structurelles et cohésion sociale en Turquie," Economics Papers from University Paris Dauphine 123456789/5838, Paris Dauphine University.
  3. Armagan Tuna Aktuna Gunes & Christophe Starzec & François Gardes, 2013. "A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00841346, HAL.


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