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Estimating the underground economy by using MIMIC models: A response to T. Breusch´s critique

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Abstract

Breusch (2005b) critically addresses an important and challenging question: Is it reliable to use the Multiple Indicators Multiple Causes model to estimate Shadow Economy? Breusch concludes that this approach is not suitable for the purpose. Breusch’s paper highlights the different procedures and hypotheses about the estimation of the size and development of the shadow economy in three papers: Giles and Tedds (2002a), Dell’Anno and Schneider (2003) and Bajada and Schneider (2005). In this paper, we will react and provide some answers to Breusch’s criticisms with special reference to the criticisms of the Dell’Anno and Schneider (2003) paper. According with us, the MIMIC model is still one of the best approaches to this purpose.

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Bibliographic Info

Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2006-07.

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Date of creation: Jul 2006
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Handle: RePEc:jku:econwp:2006_07

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Keywords: shadow economy; MIMIC model; structural modelling.;

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  1. Dell'Anno, Roberto, . "Estimating the Shadow Economy in Italy: a Structural Equation Approach," Economics Working Papers 2003-7, School of Economics and Management, University of Aarhus.
  2. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, EconWPA, revised 25 Jul 2005.
  3. Christopher Bajada & Friedrich Schneider, 2005. "The Shadow Economies Of The Asia-Pacific," Pacific Economic Review, Wiley Blackwell, vol. 10(3), pages 379-401, October.
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Cited by:
  1. José Brambila Macias & Guido Cazzavillan, 2008. "Modelling the Informal Economy in Mexico. A Structural Equation Approach," Working Papers 2008_41, Department of Economics, University of Venice "Ca' Foscari".
  2. Schneider, Friedrich G., 2007. "Shadow economies and corruption all over the world: what do we really know?," Economics Discussion Papers 2007-9, Kiel Institute for the World Economy.
  3. Vjekoslav Klaric, 2011. "Estimating the size of non-observed economy in Croatia using the MIMIC approach," Financial Theory and Practice, Institute of Public Finance, vol. 35(1), pages 59-90.
  4. Ceyhun Elgin & Friedrich Schneider, 2013. "Shadow Economies in OECD Countries: DGE vs. MIMIC Approaches," Working Papers 2013/13, Bogazici University, Department of Economics.

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