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Off the Radar: Estimating the Size of the Shadow Economy in Tunisia

Author

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  • Meriam Jerbi
  • Friedrich Schneider
  • Faouzi Abdennour

Abstract

This study estimates the size of the shadow economy in Tunisia over the period 1988–2023 using the Multiple Indicators Multiple Causes (MIMIC) model, which assesses a latent variable based on its causes and indicators. The analysis was carried out in three steps: identifying the main causes (tax pressure, unemployment, trade openness, and corruption) and key indicators (GDP growth, M0/M2 ratio, labor force participation rate); constructing a shadow economy index from the estimated coefficients of the causal variables, and calibrating it as a percentage of GDP. The results reveal an average size of 39.08%, with peaks during the 2011 Revolution (41.70%) and the COVID‐19 crisis in 2020 (46.62%), illustrating its sensitivity to shocks. The persistence of these activities in Tunisia underscores the need for structural reforms in tax, regulatory, institutional, and labor market policies to foster integration into the formal economy.

Suggested Citation

  • Meriam Jerbi & Friedrich Schneider & Faouzi Abdennour, 2026. "Off the Radar: Estimating the Size of the Shadow Economy in Tunisia," African Development Review, African Development Bank, vol. 38(1), March.
    • Handle: RePEc:bla:afrdev:v:38:y:2026:i:1:n:e70053
    DOI: 10.1111/1467-8268.70053
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    References listed on IDEAS

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    1. Mehdi Abid & Ousama Ben Salha, 2013. "The informal economy in Tunisia: measurement and linkage with the formal economy," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 6(2), pages 194-209.
    2. Mai Hassan & Friedrich Schneider, 2016. "Modelling the Egyptian Shadow Economy: A Currency Demand and A MIMIC Model Approach," CESifo Working Paper Series 5727, CESifo.
    3. Joseph Mawejje, 2024. "Government expenditure, informality, and economic growth: Evidence from Eastern and Southern African countries," African Development Review, African Development Bank, vol. 36(1), pages 125-138, March.
    4. Mai HASSAN & Friedrich SCHNEIDER, 2016. "Modelling the Egyptian Shadow Economy: A MIMIC model and A Currency Demand approach," Journal of Economics and Political Economy, KSP Journals, vol. 3(2), pages 309-339, June.
    5. Friedrich Schneider, 2023. "Do Different Estimation Methods Lead to Implausible Differences in the Size of Nonobserved or Shadow Economies? A Preliminary Answer," Annual Review of Resource Economics, Annual Reviews, vol. 15(1), pages 257-277, October.
    6. Hassan, Mai & Schneider, Friedrich, 2016. "Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013," IZA Discussion Papers 10281, IZA Network @ LISER.
    7. Bennihi, Aymen Salah & Bouriche, Lahcene & Schneider, Friedrich, 2021. "The informal economy in Algeria: New insights using the MIMIC approach and the interaction with the formal economy," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 470-491.
    8. Melingui Bate Adalbert Abraham Ghislain, 2022. "Does the diffusion of information and communication technologies affect the shadow economy in Africa?," African Development Review, African Development Bank, vol. 34(4), pages 513-526, December.
    9. Offiong Helen Solomon & Sibhaa Shrestha, 2014. "Does the informal sector thrive under democracy or autocracy? the case of Nepal," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(3), pages 245-267, July-Sept.
    10. Leandro Medina & Friedrich Schneider, 2019. "Shedding Light on the Shadow Economy: A Global Database and the Interaction with the Official One," CESifo Working Paper Series 7981, CESifo.
    11. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    12. Henri Njangang & Luc Ndeffo Nembot & Joseph Pasky Ngameni, 2020. "Does financial development reduce the size of the informal economy in sub‐Saharan African countries?," African Development Review, African Development Bank, vol. 32(3), pages 375-391, September.
    13. Emmanuel Umoru Haruna & Usman Alhassan, 2022. "Does digitalization limit the proliferation of the shadow economy in African countries? An in‐depth panel analysis," African Development Review, African Development Bank, vol. 34(S1), pages 34-62, July.
    14. Arnis Sauka & Friedrich Schneider & Colin C. Williams (ed.), 2016. "Entrepreneurship and the Shadow Economy," Books, Edward Elgar Publishing, number 16655.
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