Mission Implausible II: Measuring the Informal Sector in a Transition Economy Using Macro Methods
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 EconWPA in its series Public Economics with number 0404002.
Length: 26 pages
Date of creation: 06 Apr 2004
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Underground economy; tax evasion;
Other versions of this item:
- Jan Hanousek & Filip Palda, 2004. "Mission Implausible III: Measuring the Informal Sector in a Transition Economy using Macro Methods1," William Davidson Institute Working Papers Series 2004-683, William Davidson Institute at the University of Michigan.
- D6 - Microeconomics - - Welfare Economics
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- H - Public Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-11 (All new papers)
- NEP-DEV-2004-04-11 (Development)
- NEP-LAM-2004-04-11 (Central & South America)
- NEP-MAC-2004-04-11 (Macroeconomics)
- NEP-PBE-2004-04-11 (Public Economics)
- NEP-TRA-2004-04-11 (Transition Economics)
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