Mission Implausible III: Measuring the Informal Sector in a Transition Economy using Macro Methods1
AbstractAn easy and popular method for measuring the size of the underground economy is to use macro-data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the money demand and electricity demand equations, or at the very least on knowledge of how these parameters are changing. We argue that the pace of change of these parameters (such as velocity) is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable. We make our point by using the Czech Republic and other transition country data from the financial and electricity sectors.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-683.
Length: 25 pages
Date of creation: 01 May 2004
Date of revision:
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shadow economy; measureament of tax evasion; transition economies;
Other versions of this item:
- Jan Hanousek & Filip Palda, 2004. "Mission Implausible II: Measuring the Informal Sector in a Transition Economy Using Macro Methods," Public Economics 0404002, EconWPA.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance
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