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Shadow Economy, Tax Evasion, and Transfer Fraud - Definition, Measurement, and Data Problems

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  • Hans-Georg Petersen
  • Ulrich Thiessen
  • Pierre Wohlleben

Abstract

The paper tries to shed some light on the definition of the shadow economy, in order to separate shadow activities from market activities and household production. A total income concept is applied, which is based on the labor force being engaged in market, shadow and household activities. Based on such a clear concept, tax evasion can be defined and identified in the market sector and is also usually taking place in the shadow economy, where it is often accompanied by evasion of social security contributions as well as transfer fraud. Money usage in the three sectors is then critically analyzed, and measurement as well as data problems are seriously taken into consideration. The results of our research project suggest that the size of the shadow economy as estimated with the currency approach often yields the highest possible values. Other approaches and plausibility considerations produce much lower values, which seem to be much more realistic. Consequently, policy considerations to strengthen the control mechanisms should be met with utmost skepticism.

Suggested Citation

  • Hans-Georg Petersen & Ulrich Thiessen & Pierre Wohlleben, 2010. "Shadow Economy, Tax Evasion, and Transfer Fraud - Definition, Measurement, and Data Problems," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 421-441.
  • Handle: RePEc:taf:intecj:v:24:y:2010:i:4:p:421-441 DOI: 10.1080/10168737.2010.525973
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    References listed on IDEAS

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    Cited by:

    1. Mai Hassan & Friedrich Schneider, 2016. "Modelling the Egyptian Shadow Economy: A Currency Demand and A MIMIC Model Approach," CESifo Working Paper Series 5727, CESifo Group Munich.
    2. 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.

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