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Measuring the shadow economy and its drivers: the case of peripheral EMU countries

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  • Vicent Almenar
  • José Luis Sánchez
  • Juan Sapena

Abstract

We adopt a long-run perspective to investigate the size of the shadow economy and explore the trends in this area. The analysis is based on a panel of peripheral EMU countries over the period 1965-2015. Our empirical approach relies on a multiple indicators and multiple causes (MIMIC) framework. This approach is a variant of structural equation modelling (SEM). We used two sets of variables, (i.e. potential determinants and indicator variables) to estimate an underlying (unobserved) index that measures the evolution of the shadow economy. Ascertaining the relative importance of the shadow economy enabled analysis of its relationship with other institutional and social issues (e.g. corruption, productivity and economic growth), and helped identify the channels through which the shadow economy might negatively influence the performance of different economies. In the sampled countries, shadow activity increased over the study period. It also seemed to be affected by the economic cycle.

Suggested Citation

  • Vicent Almenar & José Luis Sánchez & Juan Sapena, 2020. "Measuring the shadow economy and its drivers: the case of peripheral EMU countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 2904-2918, January.
    • Handle: RePEc:taf:reroxx:v:33:y:2020:i:1:p:2904-2918
    DOI: 10.1080/1331677X.2019.1706601
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    Cited by:

    1. Aysel Amir & Korhan Gökmenoğlu, 2023. "Analyzing the Drivers of the Shadow Economy for the Case of the CESEE Region," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 71(2), pages 155-181, February.

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