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Mission Implausible II: Measuring the Informal Sector in a Transition Economy Using Macro Methods

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Author Info

  • Jan Hanousek

    (Center for Economic Research & Graduate Education)

  • Filip Palda

    (École nationale d'administration publique)

Abstract

An 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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File URL: http://128.118.178.162/eps/pe/papers/0404/0404002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0404002.

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Length: 26 pages
Date of creation: 06 Apr 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0404002

Note: Type of Document - pdf; pages: 26. PDF file can be read or downloaded
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Web page: http://128.118.178.162

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Keywords: Underground economy; tax evasion;

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References

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  1. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  2. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
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Cited by:
  1. Chiumya, Chiza, 2007. "The Parallel Economy in Malawi: Size, Effect on Tax Revenue and Policy Options," MPRA Paper 9860, University Library of Munich, Germany.
  2. repec:hal:journl:hal-00270544 is not listed on IDEAS
  3. Guriev, Sergei & Rachinsky, Andrei, 2006. "The Evolution of Personal Wealth in the Former Soviet Union and Central and Eastern Europe," Working Paper Series RP2006/120, World Institute for Development Economic Research (UNU-WIDER).
  4. Stanisław Cichocki, 2008. "Shadow economy and its relations with tax system and state budget in Poland 1995 - 2007," Working Papers 2008-05, Faculty of Economic Sciences, University of Warsaw.
  5. repec:hal:cesptp:hal-00270544 is not listed on IDEAS

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