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Estimating the size of non-observed economy in Croatia using the MIMIC approach

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  • Vjekoslav Klaric

    (student)

Abstract

This paper gives a quick overview of the approaches that have been used in the research of shadow economy, starting with the defi nitions of the terms “shadow economy” and “non-observed economy”, with the accent on the ISTAT/Eurostat framework. Several methods for estimating the size of the shadow economy and the non-observed economy are then presented. The emphasis is placed on the MIMIC approach, one of the methods used to estimate the size of the nonobserved economy. After a glance at the theory behind it, the MIMIC model is then applied to the Croatian economy. Considering the described characteristics of different methods, a previous estimate of the size of the non-observed economy in Croatia is chosen to provide benchmark values for the MIMIC model. Using those, the estimates of the size of non-observed economy in Croatia during the period 1998-2009 are obtained.

Suggested Citation

  • Vjekoslav Klaric, 2011. "Estimating the size of non-observed economy in Croatia using the MIMIC approach," Financial Theory and Practice, Institute of Public Finance, vol. 35(1), pages 59-90.
  • Handle: RePEc:ipf:finteo:v:35:y:2011:i:1:p:59-90
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    File URL: http://www.ijf.hr/eng/FTP/2011/1/klaric.pdf
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    References listed on IDEAS

    as
    1. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
    2. Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
    3. Otto Driel, 1978. "On various causes of improper solutions in maximum likelihood factor analysis," Psychometrika, Springer;The Psychometric Society, vol. 43(2), pages 225-243, June.
    4. Christopher Bajada & Friedrich Schneider, 2005. "The Shadow Economies Of The Asia-Pacific," Pacific Economic Review, Wiley Blackwell, vol. 10(3), pages 379-401, October.
    5. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
    6. Roberto Dell’Anno & Friedrich G. Schneider, 2006. "Estimating the underground economy by using MIMIC models: A response to T. Breusch´s critique," Economics working papers 2006-07, Department of Economics, Johannes Kepler University Linz, Austria.
    7. 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.
    8. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, EconWPA, revised 15 Dec 2005.
    9. 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.
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    Keywords

    non-observed economy; shadow economy; Croatia; MIMIC;

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