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Illegal Activities, but Still Value Added Ones (?): Size, Causes, and Measurement of the Shadow Economies all over the World

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Author Info
Friedrich Schneider ()

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Abstract

Using various methods estimates about the size of the shadow economy in 76 developing, transition and OECD countries are presented. The average size of the shadow economy (in percent of GDP) over 1989-93 in developing countries is 39%, in transition countries 23% and in OECD countries 12%. An increasing burden of taxation and social security contributions combined with rising state regulatory activities are the driving forces for the growth and size of the shadow economy. According to some findings, a growing shadow economy has a negative impact on official GDP growth, however, this result is not robust, other studies show the opposite effect.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 305.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_305

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Find related papers by JEL classification:
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bagachwa, M. S. D. & Naho, A., 1995. "Estimating the second economy in Tanzania," World Development, Elsevier, vol. 23(8), pages 1387-1399, August. [Downloadable!] (restricted)
  2. Frey, Bruno S. & Weck-Hanneman, Hannelore, 1984. "The hidden economy as an 'unobserved' variable," European Economic Review, Elsevier, vol. 26(1-2), pages 33-53. [Downloadable!] (restricted)
  3. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May. [Downloadable!] (restricted)
  4. Friedrich Schneider, 2000. "The Increase of the size of the shadow economy of 18 OECD countries: Some preliminary explanations," Economics working papers 2000-08, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
    Other versions:
  5. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June. [Downloadable!] (restricted)
  6. Schneider, Friedrich, 1986. " Estimating the Size of the Danish Shadow Economy Using the Currency Demand Approach: An Attempt," Scandinavian Journal of Economics, Blackwell Publishing, vol. 88(4), pages 643-68.
  7. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640. [Downloadable!] (restricted)
    Other versions:
  8. Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA. [Downloadable!]
  9. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997-2), pages 159-240. [Downloadable!]
  10. Helberger, Christof & Knepel, Helmut, 1988. "How big is the shadow economy? : A re-analysis of the unobserved-variable approach of B.S. Frey and H. Weck-Hannemann," European Economic Review, Elsevier, vol. 32(4), pages 965-976, April. [Downloadable!] (restricted)
  11. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March. [Downloadable!] (restricted)
  12. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December. [Downloadable!] (restricted)
  13. Isachsen, Arne Jon & Strom, Steiner, 1985. "The Size and Growth of the Hidden Economy in Norway," Review of Income and Wealth, Blackwell Publishing, vol. 31(1), pages 21-38, March.
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  15. Petersen, Hans-Georg, 1982. "Size of the Public Sector, Economic Growth and the Informal Economy: Development Trends in the Federal Republic of Germany," Review of Income and Wealth, Blackwell Publishing, vol. 28(2), pages 191-215, June.
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  19. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June. [Downloadable!] (restricted)
  20. repec:att:wimass:199610 is not listed on IDEAS
  21. Edgar L. Feige, 2005. "Overseas Holdings Of U.S.Currency And The Underground Economy," Macroeconomics 0501022, EconWPA. [Downloadable!]
  22. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages F370-80, June. [Downloadable!] (restricted)
    Other versions:
  23. Peter J. Quirk, 1996. "Macroeconomic Implications of Money Laundering," IMF Working Papers 96/66, International Monetary Fund.
  24. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA. [Downloadable!]
  25. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  26. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August. [Downloadable!] (restricted)
  27. Bhattacharyya, Dilip K, 1999. "On the Economic Rationale of Estimating the Hidden Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F348-59, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Chang Woon Nam & Andrea Gebauer & Ruediger Parsche, 2003. "Is the Completion of EU Single Market Hindered by VAT Evasion?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  2. Chang Woon Nam & Ruediger Parsche & Barbara Schaden, 2001. "Measurement of Value Added Tax Evasion in Selected EU Countries on the Basis of National Accounts Data," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Strand,J., 2000. "Tax distortions, household production and black-market work," Memorandum 35/2000, Oslo University, Department of Economics. [Downloadable!]
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