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Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions

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  • Friedrich Schneider
  • Andreas Bühn

Abstract

This paper presents the various methods to estimate the size of the shadow economy, their strengths and weaknesses. The purpose of the paper is twofold. Firstly, it demonstrates that no ideal method to estimate the size and development of the shadow economy exists. Because of its flexibility, the MIMIC method used to get macro-estimates of the size of the shadow economy is discussed in greater detail. Secondly, the paper focuses on the definition and causal factors of the shadow economy as well as on a comparison of the size of the shadow economy using different estimation methods.

Suggested Citation

  • Friedrich Schneider & Andreas Bühn, 2013. "Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions," CESifo Working Paper Series 4448, CESifo.
    • Handle: RePEc:ces:ceswps:_4448
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    References listed on IDEAS

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    More about this item

    Keywords

    shadow economy estimates; MIMIC approach; methods to estimate the shadow economy; advantages and disadvantages of the measurement methods;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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