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Size And Implication Of Underground Economy In Romania - A Mimic Approach

Author

Listed:
  • Corina - Maria Ene

    (Hyperion University from Bucharest)

  • Andrei Stefanescu

    (1 Decembrie 1918 University of Alba Iulia)

Abstract

Since the economic crisis affected the real economy in Romania, the official GDPdeclined by almost 5 percent in 2009 compared with 2008, 1.3 percent in 2010 against the previousyear and unemployment increased too. In 2011 a moderate growth of the GDP is expected butunemployment will further increase. Against this background the extent of the underground economy inRomania and its development over time are once again the subject of intense debate, as many peoplewill attempt to make up for loss of income in the official economy through greater participation in theunderground economy.The objective of this paper is to estimate the size of the underground economy in Romania by using theMultiple Indicators Multiple Causes (MIMIC) method. The MIMIC approach is based on the idea thatthe underground economy is not a directly observable measure, but it is possible to approximate itusing quantitatively measurable causes of working in the underground economy and using indicatorsin which underground economic activities are reflected. In addition, the paper aims at clarifying towhat extent the variables explain the size of the underground economy in Romania.

Suggested Citation

  • Corina - Maria Ene & Andrei Stefanescu, 2011. "Size And Implication Of Underground Economy In Romania - A Mimic Approach," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 1-8.
  • Handle: RePEc:alu:journl:v:1:y:2011:i:13:p:8
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    File URL: http://oeconomica.uab.ro/upload/lucrari/1320111/08.pdf
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    References listed on IDEAS

    as
    1. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-66.
    2. Lindsay M. Tedds & David E. A. Giles, 2000. "Modelling the Underground Economies in Canada and New Zealand: A Comparative Analysis," Econometrics Working Papers 0003, Department of Economics, University of Victoria.
    3. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
    4. Corina-Maria Ene, 2010. "Tax Evasion Dynamics in Romania Reflected by Fiscal Inspection Activities," Romanian Journal of Economics, Institute of National Economy, vol. 30(1(39)), pages 146-158, June.
    5. Enste, Dominik & Schneider, Friedrich, 1998. "Increasing Shadow Economies all over the World - Fiction or Reality?," IZA Discussion Papers 26, Institute for the Study of Labor (IZA).
    6. Tedds, Lindsay, 2005. "The Underground Economy in Canada," MPRA Paper 4229, University Library of Munich, Germany.
    7. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, EconWPA, revised 15 Dec 2005.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Misbah Kiani & Adeel Ahmed & Khalid Zaman, 2015. "Combining qualitative and quantitative approaches for measuring underground economy of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 295-317, January.

    More about this item

    Keywords

    underground economy; Multiple Indicators Multiple Causes (MIMIC); latent variable; structuralequation model;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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