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The Size and Development of the Shadow Economies of 22 Transition and 21 OECD Countries

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Author Info
Schneider, Friedrich () (University of Linz and IZA Bonn)

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Abstract

Using the currency demand and DYMIMIC approaches estimates are presented about the size of the shadow economy in 22 Transition and 21 OECD countries. Over 2001/2002 in 21 OECD countries is the average size of the shadow economy (in percent of official GDP) 16.7% of "official" GDP and of 22 Transition countries 38.0%. The average size of the shadow economy labor force (in percent of the population of working age) of the year 1998/99 in 7 OECD-countries is 15.3% and in 22 Transition countries is 30.2%. 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 (labor force).

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 514.

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Length: 51 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:iza:izadps:dp514

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Related research
Keywords: shadow economy transition economies tax and social security burden government regulation

Other versions of this item:

Find related papers by JEL classification:
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

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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. 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)
  2. 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.
  3. 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:
  4. Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA. [Downloadable!]
  5. Friedrich Schneider, 2001. "Arbeit im Schatten: Einige theoretische und empirische Überlegungen Ïber die Schattenwirtschaft," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 2(4), pages 425-439, November. [Downloadable!] (restricted)
  6. 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)
  7. Annette Mummert & Friedrich Schneider, 2001. "The German Shadow Economy: Parted in a United Germany?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 286-, July.
  8. 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)
  9. 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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  11. Contini, Bruno B, 1981. "Labor Market Segmentation and the Development of the Parallel Economy-The Italian Experience," Oxford Economic Papers, Oxford University Press, vol. 33(3), pages 401-12, November. [Downloadable!] (restricted)
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  13. Edgar L. Feige, 2005. "Overseas Holdings Of U.S.Currency And The Underground Economy," Macroeconomics 0501022, EconWPA. [Downloadable!]
  14. 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:
  15. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303. [Downloadable!] (restricted)
  16. 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)
  17. Klovland, Jan Tore, 1984. " Tax Evasion and the Demand for Currency in Norway and Sweden. Is There a Hidden Relationship?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 86(4), pages 423-39.
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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. Davis, Steven J. & Henrekson, Magnus, 2004. "Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons," Working Paper Series in Economics and Finance 560, Stockholm School of Economics. [Downloadable!]
    Other versions:
  2. Rutkowski, Jan, 2006. "Labor market developments during economic transition," Policy Research Working Paper Series 3894, The World Bank. [Downloadable!]
  3. Marco Di Domizio, 2007. "Effect of social contribution evasion on working time allocation: theoretical contribution in a two sector model," Discussion Papers 6_2007, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
  4. Olovsson, Conny, 2004. "Why do Europeans Work so Little?," Seminar Papers 727, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  5. Brown, J. David & Earle, John S. & Lup, Dana, 2004. "What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania," IZA Discussion Papers 1343, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Pinar Yesin, 2004. "Tax Collection Costs, Tax Evasion and Optimal Interest Rates," Working Papers 04.02, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
  7. Shima, Isilda, 2004. "The shadow economy in Norway: Demand for currency approach," Memorandum 10/2004, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  8. J. David Brown & John S. Earle & Dana Lup, 2004. "Finance, Human Capital, Technical Assistance, and the Business Environment in Romania," William Davidson Institute Working Papers Series 2004-639, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  9. Elöd Takáts & Tamás K. Papp, 2008. "Tax Rate Cuts and Tax Compliance--The Laffer Curve Revisited," IMF Working Papers 08/7, International Monetary Fund. [Downloadable!]
  10. Alesina, Alberto F & Glaeser, Edward L & Sacerdote, Bruce, 2005. "Work and Leisure in the US and Europe: Why So Different?," CEPR Discussion Papers 5140, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Elias Mossialos & Sara Allin & Konstantina Davaki, 2005. "Analysing the Greek health system: a tale of fragmentation and inertia," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages S151-S168. [Downloadable!]
  12. Pilar García Gómez & Guillem López, 2003. "Hypothesis on immigration and welfare," Economics Working Papers 905, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005. [Downloadable!]
  13. Zoe Kuehn, 2007. "Tax rates, governance, and the informal economy in high-income countries," Economics Working Papers we078551, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  14. Benno Torgler, 2003. "Tax Morale in Transition Countries," Post-Communist Economies, Taylor and Francis Journals, vol. 15(3), pages 357-381, September. [Downloadable!] (restricted)
  15. Honorati, Maddalena & Gatti, Roberta, 2008. "Informality among formal firms : firm-level, cross-country evidence on tax compliance and access to credit," Policy Research Working Paper Series 4476, The World Bank. [Downloadable!]
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