The dynamics of parallel economies. Measuring the informal sector in Mexico
The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long-run relationship between informality and economic growth.
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.:
- Ahumada, Hildegart & Alvaredo, Facundo & Canavese, Alfredo J., 2006. "The Demand for Currency Approach and the Size of the Shadow Economy: A Critical Assessment," Berkeley Olin Program in Law & Economics, Working Paper Series qt6zn9p98b, Berkeley Olin Program in Law & Economics.
- Maurizio Bovi & Laura Castellucci, 2001. "Cosa sappiamo dell'economia sommersa in Italia al di là dei luoghi comuni? Alcune proposizioni empiricamente fondate," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2001(6).
- Maurizio Bovi & Roberto Dell’Anno, 2010.
"The changing nature of the OECD shadow economy,"
Journal of Evolutionary Economics,
Springer, vol. 20(1), pages 19-48, January.
- Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters, in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc.
- Chiarini Bruno & Marzano Elisabetta, 2004.
"Dimensione e dinamica dell'economia sommersa: un approfondimento del "currency demand approach","
Politica economica - Journal of Economic Policy (PEJEP),
Società editrice il Mulino, issue 3, pages 303-334.
- Bruno Chiarini & Elisabetta Marzano, 2004. "Dimensione E Dinamica Dell'Economia Sommersa: Un Approfondimento Del Currency Demand Approach," Working Papers 4_2004, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Adrián Guisarri, 1987. "La Demanda de Circulante y la Informalidad en la Argentina 1930-1983," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 24(72), pages 197-224.
- Loayza, Norman A., 1997.
"The economics of the informal sector : a simple model and some empirical evidence from Latin America,"
Policy Research Working Paper Series
1727, The World Bank.
- Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
- Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164, March.
- 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.
- Friedrich Schneider & Dominik Enste, 1999.
"Shadow Economies Around the World - Size, Causes, and Consequences,"
CESifo Working Paper Series
196, CESifo Group Munich.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World; Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
- Helberger, Christof & Knepel, Helmut, 1988. "How big is the shadow economy? : A re-analysis of the unobserved-variable approach of B.S. Frey and H. Weck-Hannemann," European Economic Review, Elsevier, vol. 32(4), pages 965-976, April.
- Shima, Isilda, 2004.
"The shadow economy in Norway: Demand for currency approach,"
10/2004, Oslo University, Department of Economics.
- Isilda Shima, 2005. "The Shadow Economy in NorwayDemand for Currency Approach," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 61 - 78, February.
- Klovland, Jan Tore, 1984. " Tax Evasion and the Demand for Currency in Norway and Sweden. Is There a Hidden Relationship?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 86(4), pages 423-39.
- 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.
- Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
- Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303.
- Peter S. Spiro, 1996. "Monetary Estimates of the Underground Economy: A Critical Evaluation," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 171-75, April.
- Andrew Swiston & Ales Bulir, 2006. "What Explains Private Saving in Mexico?," IMF Working Papers 06/191, International Monetary Fund.
- Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 08/102, International Monetary Fund.
- Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, December.
- Chaudhuri, Kausik & Schneider, Friedrich & Chattopadhyay, Sumana, 2006. "The size and development of the shadow economy: An empirical investigation from states of India," Journal of Development Economics, Elsevier, vol. 80(2), pages 428-443, August.
- Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:63:y:2009:i:3:p:189-199. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.