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Measuring the Informal Economy in the Caucasus and Central Asia

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  • Yasser Abdih
  • Leandro Medina

Abstract

This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/137.

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Length: 18
Date of creation: 31 May 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/137

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Keywords: Shadow economy; Central Asia; Tax burdens; Labor markets; Economic models; Cross country analysis; Informal economy; latent variable; Caucasus and Central Asia.; employment; labor force; self employment; total employment; labor force participation; labor market regulations; labor market institutions; unemployment; rigid labor market; collective bargaining; job creation; labor regulation; employment outcomes; labor contracts; labor market rigidities; total labor force; jobs; labor market rigidity; labor organization; rigid labor markets; restrictive labor market regulations; labor regulations;

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  1. Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 08/102, International Monetary Fund.
  2. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 38(1), pages 77-114, March.
  3. Roberta Gatti Diego F. Angel-Urdinola & Joana Silva & Andras Bodor, 2011. "Striving for Better Jobs : The Challenge of Informality in the Middle East and North Africa Region," World Bank Other Operational Studies 10857, The World Bank.
  4. Feldmann, Horst, 2009. "The unemployment effects of labor regulation around the world," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 76-90, March.
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