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Estimating the Shadow Economy in Italy: a Structural Equation Approach

Author

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  • Dell'Anno, Roberto

    () (Department of Economics and Statistics, University of Salerno, Italy and Department of Economics, University of Aarhus, Denmark)

Abstract

The aims of this paper are, firstly, to estimate the Italian shadow economy by means of a structural equation approach and, secondly, to verify the generality of the main criticisms about the reliability of the "MIMIC method" (or model approach) for this kind of analysis. Using the Italian shadow economy, I will show how only some of these are confirmed, others exist as a consequence of the model implementation and sample and some more will exposed to question this methodology. Particular attention is paid to detect the assumptions that should be respected to use appropriately this technique (test of multinormality, independence between measurement and structural errors, unit root detection, etc.). According to the obtained results, is confirmed a sufficient reliability of this approach for the estimate of the size of underground economy.

Suggested Citation

  • Dell'Anno, Roberto, "undated". "Estimating the Shadow Economy in Italy: a Structural Equation Approach," Economics Working Papers 2003-7, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2003-7
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    File URL: ftp://ftp.econ.au.dk/afn/wp/03/wp03_07.pdf
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    More about this item

    Keywords

    Shadow Economy; Structural Equation Model; Tax Evasion;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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