Quantifying the shadow economy: measurement with theory
AbstractWe construct a dynamic, general equilibrium model of tax evasion where agents choose to report some of their income. Unreported income requires using a payment method that avoids recordkeeping – cash. Trade using cash to avoid taxes is the theoretical measure of the shadow economy from our model. We then calibrate our model using money, interest rate and GDP data to back out the size of the shadow economy for a sample of 30 countries and compare our estimates to traditional ad hoc estimates. Our results generate reasonably larger estimates for the size of the shadow economy than exist in previous literature.>
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2011-015.
Date of creation: 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
- NEP-CBA-2011-07-02 (Central Banking)
- NEP-DGE-2011-07-02 (Dynamic General Equilibrium)
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.:
- Edgar L. Feige, 2005. "Overseas Holdings Of U.S.Currency And The Underground Economy," Macroeconomics 0501022, EconWPA.
- Edgar L. Feige, 2005.
"The Underground Economy And The Currency Enigma,"
- Koreshkova, Tatyana A., 2006. "A quantitative analysis of inflation as a tax on the underground economy," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 773-796, May.
- Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
- Friedrich Schneider & Dominik Enste, 1999.
"Shadow Economies Around the World - Size, Causes, and Consequences,"
CESifo Working Paper Series
196, CESifo Group Munich.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World - Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
- Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June.
- Christopher J. Waller, 2009.
"Random matching and money in the neoclassical growth model: some analytical results,"
2009-034, Federal Reserve Bank of St. Louis.
- Waller, Christopher J., 2011. "Random Matching And Money In The Neoclassical Growth Model: Some Analytical Results," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S2), pages 293-312, September.
- 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.
- Manoel Bittencourt & Rangan Gupta & Lardo Stander, 2013.
"Tax evasion, financial development and inflation: theory and empirical evidence,"
201316, University of Pretoria, Department of Economics.
- Bittencourt, Manoel & Gupta, Rangan & Stander, Lardo, 2014. "Tax evasion, financial development and inflation: Theory and empirical evidence," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 194-208.
- Boel, Paola, 2013. "On the Redistributive Effects of Inflation: an International Perspective," Working Paper Series 274, Sveriges Riksbank (Central Bank of Sweden), revised 01 Nov 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).
If references are entirely missing, you can add them using this form.