Estimating the Underground Economy using MIMIC Models
AbstractMIMIC models are being used to estimate the size of the underground economy or the tax gap in various countries. In this paper I examine critically both the method in general and three applications of the method by Giles and Tedds (2002), Bajada and Schneider (2005) and Dell’Anno and Schneider (2003). Connections are shown to familiar econometric models of linear regression and simultaneous equations. I also investigate the auxiliary procedures used in this literature, including differencing as a treatment for unit roots and the calibration of results using other data. The three applications demonstrate how the method is subjective and pliable in practice. I conclude that the MIMIC method is unfit for the purpose.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0507003.
Length: 36 pages
Date of creation: 12 Jul 2005
Date of revision: 25 Jul 2005
Note: Type of Document - pdf; pages: 36
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underground economy; MIMIC; structural modelling; LISREL® software;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-07-18 (All new papers)
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.:
- Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
- Trevor Breusch, 2005. "Australia's Cash Economy: Are the estimates credible?," Macroeconomics 0509025, EconWPA, revised 23 Sep 2005.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World," IMF Working Papers 00/26, International Monetary Fund.
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