In this paper I support using econometric techniques to measure the size of the hidden (underground) economy, because such information is important for the construction of certain economic models, and for empirical policy analysis. Generally, detailed information on the output of the hidden economy is unavailable. Even where careful measures of the underground economy have been constructed, usually these data are available only periodically. Important exceptions are the classic results of Tanzi (1983) for the United States, and Bhattacharyya's (1990) series for the United Kingdom. In the case of the New Zealand economy, a time-series of data on the hidden economy has been generated recently (Giles, 1997a). This provides the unusual opportunity to undertake econometric modelling in a way which takes account of such activity formally. Moreover, we can examine the policy implications arising from the linkages between hidden output and various measured economic aggregates.
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Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number
9809.
Length: 16 pages Date of creation: 22 Sep 1998 Date of revision: Publication status: Forthcoming in "Economic Journal", June 1999. Handle: RePEc:vic:vicewp:9809
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Find related papers by JEL classification: C5 - Mathematical and Quantitative Methods - - Econometric Modeling H1 - Public Economics - - Structure and Scope of Government H2 - Public Economics - - Taxation, Subsidies, and Revenue
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