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Comment on Feige's Paper "Reflections on the Meaning and Measurement of Unobserved Economies: What do we really know about the 'Shadow Economy'?"

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  • Friedrich Schneider

Abstract

This comment provides a reply to Prof. Feige’s paper with the title “Reflections on the Meaning and Measurement of Unobserved Economies: What do we really know about the ‘Shadow Economy’?”, in which Prof. Feige heavily criticizes me. I show that the same critique which Prof. Feige raises against me can be put forward to his results on the non-observed economy. Moreover, I show that my dataset is appropriately documented and I also address the problem of calibration and normalization issues when undertaking a MIMIC estimation. In the concluding chapter I suggest that a joint paper should be written in which all the pros and cons of each method of estimating the size and development of the non-observed/shadow economy are presented and criticized.

Suggested Citation

  • Friedrich Schneider, 2016. "Comment on Feige's Paper "Reflections on the Meaning and Measurement of Unobserved Economies: What do we really know about the 'Shadow Economy'?"," CESifo Working Paper Series 5818, CESifo.
    • Handle: RePEc:ces:ceswps:_5818
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    References listed on IDEAS

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    1. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    2. Gorana Krstić & Friedrich Schneider (ed.), 2015. "Formalizing the Shadow Economy in Serbia," Contributions to Economics, Springer, edition 127, number 978-3-319-13437-6, December.
    3. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    4. 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.
    5. Feige, Edgar L. & Urban, Ivica, 2008. "Measuring underground (unobserved, non-observed, unrecorded) economies in transition countries: Can we trust GDP?," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 287-306, June.
    6. Lars Feld & Claus Larsen, 2012. "Self-perceptions, government policies and tax compliance in Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 78-103, February.
    7. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo.
    8. repec:pal:coneco:978-3-319-13437-6 is not listed on IDEAS
    9. Schneider,Friedrich & Enste,Dominik H., 2016. "The Shadow Economy," Cambridge Books, Cambridge University Press, number 9781316600894.
    10. Enste, Dominik & Schneider, Friedrich G., 2006. "Welchen Umfang haben Schattenwirtschaft und Schwarzarbeit? Ein Versuch zur Lösung des Rätsels," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW - Leibniz Information Centre for Economics, vol. 86(3), pages 185-191.
    11. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, University Library of Munich, Germany, revised 15 Dec 2005.
    12. Colin C. Williams & Friedrich Schneider, 2016. "Measuring the Global Shadow Economy," Books, Edward Elgar Publishing, number 16551.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Saha, Shrabani & Beladi, Hamid & Kar, Saibal, 2021. "Corruption control, shadow economy and income inequality: Evidence from Asia," Economic Systems, Elsevier, vol. 45(2).
    2. Leandro Medina & Friedrich Schneider, 2017. "Shadow Economies around the World: New Results for 158 Countries over 1991-2015," CESifo Working Paper Series 6430, CESifo.
    3. Khorana, Sangeeta & Caram, Santiago & Biagetti, Marco, 2021. "Vicious Circle or New Paradigm? Exploring the Impact of Shadow Economy on Labour Market in Latin America and Eurozone," GLO Discussion Paper Series 983, Global Labor Organization (GLO).
    4. James Alm, 2019. "What Motivates Tax Compliance?," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 353-388, April.
    5. Leandro Medina & Friedrich Schneider, 2019. "Shedding Light on the Shadow Economy: A Global Database and the Interaction with the Official One," CESifo Working Paper Series 7981, CESifo.
    6. Piotr Dybka & Bartosz Olesiński & Marek Rozkrut & Andrzej Torój, 2020. "Measuring the uncertainty of shadow economy estimates using Bayesian and frequentist model averaging," KAE Working Papers 2020-046, Warsaw School of Economics, Collegium of Economic Analysis.
    7. Piotr Dybka & Bartosz Olesiński & Marek Rozkrut & Andrzej Torój, 2023. "Measuring the model uncertainty of shadow economy estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(4), pages 1069-1106, August.
    8. Jobst, Clemens & Stix, Helmut, 2017. "Doomed to Disappear? The Surprising Return of Cash Across Time and Across Countries," CEPR Discussion Papers 12327, C.E.P.R. Discussion Papers.
    9. Schneider, Friedrich, 2017. "Restricting or Abolishing Cash: An Effective Instrument for Fighting the Shadow Economy, Crime and Terrorism?," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162914, Deutsche Bundesbank.
    10. Friedrich Schneider, 2021. "Do Different Estimation Methods Lead to Implausible Differences in the Size of the Non-Observed or Shadow Economies? A Preliminary Answer," CESifo Working Paper Series 9434, CESifo.
    11. Aziz N. Berdiev & James W. Saunoris & Friedrich Schneider, 2018. "Give Me Liberty, or I Will Produce Underground: Effects of Economic Freedom on the Shadow Economy," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 537-562, October.
    12. Fredström, Ashkan & Peltonen, Juhana & Wincent, Joakim, 2021. "A country-level institutional perspective on entrepreneurship productivity: The effects of informal economy and regulation," Journal of Business Venturing, Elsevier, vol. 36(5).
    13. Vicente Ríos & Antonio Gómez & Pedro Pascual, 2021. "Raising the Accuracy of Shadow Economy Measurements," Hacienda Pública Española / Review of Public Economics, IEF, vol. 239(4), pages 71-125, November.
    14. Chletsos, Michael & Sintos, Andreas, 2021. "Hide and seek: IMF intervention and the shadow economy," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 292-319.
    15. Dennis Nchor, 2021. "Shadow economies and tax evasion: The case of the Czech Republic, Poland and Hungary," Society and Economy, Akadémiai Kiadó, Hungary, vol. 43(1), pages 21-37, March.
    16. Piotr Dybka & Michał Kowalczuk & Bartosz Olesiński & Andrzej Torój & Marek Rozkrut, 2019. "Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 4-40, February.
    17. Friedrich Schneider, 2022. "New COVID-related results for estimating the shadow economy in the global economy in 2021 and 2022," International Economics and Economic Policy, Springer, vol. 19(2), pages 299-313, May.
    18. Feige, Edgar L., 2016. "Professor Schneider's Shadow Economy:What do we really know? A Rejoinder," MPRA Paper 71903, University Library of Munich, Germany.
    19. Schneider Friedrich & Buehn Andreas, 2017. "Shadow Economy: Estimation Methods, Problems, Results and Open questions," Open Economics, De Gruyter, vol. 1(1), pages 1-29, March.
    20. Friedrich Schneider, 2017. "Implausible Large Differences in the Sizes of Underground Economies in Highly Developed European Countries? A Comparison of Different Estimation Methods," CESifo Working Paper Series 6522, CESifo.

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    More about this item

    Keywords

    shadow economy; non-observed economy or income; macro approaches; MIMIC and currency demand approach;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • 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
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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