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A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system

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  • Armagan Tuna Aktuna Gunes

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Christophe Starzec

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • François Gardes

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

We use the demand system approach to estimate the size of informal economy in Turkey following the methodology based on the analysis of the individual consumption behaviour proposed by Pissarides, Weber (1989), Lyssiotou et al. (2004), and Fortin et al. (2009). We extend this method by taking into account both the monetary expenditures and time spent on domestic activities. The necessary information of money and time inputs in consumption on the household's level is obtained by statistical match of Turkish Family Budget and Time Use surveys (2006). As expected, the estimated model size of the informal economy in Turkey using the full (time plus money) expenditure is higher than those obtained by only monetary approach (in average 40.6% and 33.5% of GDP respectively) and also higher than obtained by more conventional macroeconomic methods (for example 35.1% by Schneider in 2005 with DYMIMIC model).

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00841346.

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Date of creation: Jun 2013
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Handle: RePEc:hal:cesptp:halshs-00841346

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Keywords: Informal economy; complete demand system; time use full expenditures;

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  1. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, Elsevier, vol. 39(1), pages 17-32, June.
  2. Nurhan Davutyan, 2008. "Estimating The Size of Turkey’s Informal Sector: An Expenditure Based Approach," Working Papers, Economic Research Forum 403, Economic Research Forum, revised May 2008.
  3. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 24(1), pages 225-40, Winter.
  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. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1.
  6. Reuben Gronau & Daniel S. Hamermesh, 2006. "Time Vs. Goods: The Value Of Measuring Household Production Technologies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 1-16, 03.
  7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 312-26, June.
  8. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(456), pages F338-47, June.
  9. Feinstein, Jonathan S, 1999. "Approaches for Estimating Noncompliance: Examples from Federal Taxation in the United States," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(456), pages F360-69, June.
  10. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 303.
  11. Bernard Fortin & Guy Lacroix & Dominique Pinard, 2009. "Évaluation de l'économie souterraine au Québec. Une approche micro-économétrique," Revue économique, Presses de Sciences-Po, Presses de Sciences-Po, vol. 60(5), pages 1257-1274.
  12. Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  13. Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
  14. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters, in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc.
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