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Discussion of Methods for Estimating the Shadow Economy

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  • Hana Zídková

Abstract

Which method of estimating the shadow economy is the best for the Czech Republic? To answer this question, it is necessary to compare the various existing methods and summarize the benefits and constraints of the individual approaches. At first, direct and indirect methods of estimating the shadow economy are described and various studies quantifying the shadow economy and tax gaps using different methods are mentioned. For each method, the advantages and drawbacks are explained based on the opinions of acknowledged authors engaged in the research in this area. Eventually, the models are compared and assessment methods for the shadow economy are recommended for different purposes depending on the intended use of the resulting estimates. In the conclusion, the partial statistical methods which can be combined to give a total assessment of the shadow economy as well as the indirect discrepancy method for calculating the VAT gap are suggested for the Czech Republic.

Suggested Citation

  • Hana Zídková, 2012. "Discussion of Methods for Estimating the Shadow Economy," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2012(6), pages 3-17.
  • Handle: RePEc:prg:jnlaop:v:2012:y:2012:i:6:id:384:p:3-17
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    References listed on IDEAS

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    More about this item

    Keywords

    shadow economy; assessment methods; estimates; tax gap;

    JEL classification:

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

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