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Shadow Economies around the World: New Results for 158 Countries over 1991-2015

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  • Leandro Medina
  • Friedrich Schneider

Abstract

Using the MIMIC method, this paper is a first attempt to estimate the size of the shadow economy of 158 countries over the period 1991 up to 2015. In addition to performing a variety of robustness tests, this paper explicitly addresses endogeneity concerns to the use of GDP as cause and indicator, by using the light intensity approach as an indicator variable as proxy for the size of the economy. Results suggest that the average size of the shadow economy of these 158 countries over 1991-2015 is 32.5% of official GDP, which was 34.82% in 1991 and decreased to 30.66% in 2015.

Suggested Citation

  • Leandro Medina & Friedrich Schneider, 2017. "Shadow Economies around the World: New Results for 158 Countries over 1991-2015," CESifo Working Paper Series 6430, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6430
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    References listed on IDEAS

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    1. Zellner, Arnold, 1970. "Estimation of Regression Relationships Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 441-454, October.
    2. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    3. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    4. Schneider Friedrich, 2015. "Schattenwirtschaft und Schattenarbeitsmarkt: Die Entwicklungen der vergangenen 20 Jahre," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(1), pages 3-25, March.
    5. Yasser Abdih & Leandro Medina, 2013. "Measuring the Informal Economy in the Caucasus and Central Asia," IMF Working Papers 13/137, International Monetary Fund.
    6. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters,in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc.
    7. Little, Roderick J A, 1988. "Missing-Data Adjustments in Large Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 287-296, July.
    8. Désirée Teobaldelli & Friedrich Schneider, 2013. "The influence of direct democracy on the shadow economy," Public Choice, Springer, vol. 157(3), pages 543-567, December.
    9. Hassan, Mai & Schneider, Friedrich, 2016. "Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013," IZA Discussion Papers 10281, Institute for the Study of Labor (IZA).
    10. Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 08/102, International Monetary Fund.
    11. Frey, Bruno S. & Weck-Hanneman, Hannelore, 1984. "The hidden economy as an 'unobserved' variable," European Economic Review, Elsevier, vol. 26(1-2), pages 33-53.
    12. Schneider,Friedrich & Enste,Dominik H., 2016. "The Shadow Economy," Cambridge Books, Cambridge University Press, number 9781316600894, August.
    13. Friedrich Schneider, 2016. "Comment on Feige's Paper "Reflections on the Meaning and Measurement of Unobserved Economies: What do we really know about the 'Shadow Economy'?"," CESifo Working Paper Series 5818, CESifo Group Munich.
    14. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303-303.
    15. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
    16. Lars P. Feld & Friedrich Schneider, 2010. "Survey on the Shadow Economy and Undeclared Earnings in OECD Countries," German Economic Review, Verein für Socialpolitik, vol. 11, pages 109-149, May.
    17. Guillermo Vuletin, 2008. "What is the Size of the Pie? Measuring the Informal Economy in Latin America and the Caribbean," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 161-191, July-Dece.
    18. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    19. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    20. Arne Jon Isachsen & Steiner Strøm, 1985. "The Size And Growth Of The Hidden Economy In Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(1), pages 21-38, March.
    21. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    22. Little, Roderick J A, 1988. "Missing-Data Adjustments in Large Surveys: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 300-301, July.
    23. Contini, Bruno B, 1981. "Labor Market Segmentation and the Development of the Parallel Economy-The Italian Experience," Oxford Economic Papers, Oxford University Press, vol. 33(3), pages 401-412, November.
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    25. Andreas Buehn & Alexander Karmann & Friedrich Schneider, 2009. "Shadow Economy and Do-it-Yourself Activities: The German Case," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(4), pages 701-722, December.
    26. Friedrich Schneider (ed.), 2011. "Handbook on the Shadow Economy," Books, Edward Elgar Publishing, number 13432.
    27. repec:hrv:faseco:30728045 is not listed on IDEAS
    28. Leandro Medina & Andrew W Jonelis & Mehmet Cangul, 2017. "The Informal Economy in Sub-Saharan Africa; Size and Determinants," IMF Working Papers 17/156, International Monetary Fund.
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    Citations

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    Cited by:

    1. Hailin Chen & Friedrich Schneider & Qunli Sun, 2018. "Size, Determinants, and Consequences of Corruption in China's Provinces: The MIMIC Approach," CESifo Working Paper Series 7175, CESifo Group Munich.
    2. repec:ebl:ecbull:eb-18-00673 is not listed on IDEAS
    3. repec:mts:jrnlee:v:18:y:2018:i:1:p:8-16 is not listed on IDEAS
    4. Philippe Adair, 2017. "Non-Observed Economy vs. the Shadow Economy in the EU: The Accuracy of Measurements Methods and Estimates revisited," Post-Print hal-01683929, HAL.
    5. repec:nax:conyad:v:63:y:2018:i:2:p:407-423 is not listed on IDEAS
    6. repec:vrs:openec:v:1:y:2017:i:1:p:1-29:n:1 is not listed on IDEAS

    More about this item

    Keywords

    shadow economies of 158 countries; MIMIC estimations; the light intensity approach; tax burden; regulation; trade openness; corruption;

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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