IDEAS home Printed from https://ideas.repec.org/p/cyb/wpaper/2007.html
   My bibliography  Save this paper

Measuring the Size of the Informal Economy: A Critical Review

Author

Listed:
  • George M. Georgiou

    () (Central Bank of Cyprus)

Abstract

There has been a burgeoning number of studies attempting to measure the size of the ‘black’ economy. These are based on a variety of methodologies and provide a range of estimates, not just across countries but also within the same countries and often by the same author(s). This raises a number of issues: What is meant by the term ‘black’ economy? Is it an appropriate description? What, if any, is the theory underlying the estimates of informal economic activity? This paper examines these and other issues, and concludes that whilst the existence of what we prefer to call the ‘informal’ or ‘grey’ economy in most countries is incontrovertible, there is a lack of consensus on the appropriate methodology for estimating its size. More importantly, the large number of studies so far are simply exercises in measurement without theory, though we are sceptical that even with strong theoretical underpinnings it is possible to provide accurate estimates of a complicated web of informal activities.

Suggested Citation

  • George M. Georgiou, 2007. "Measuring the Size of the Informal Economy: A Critical Review," Working Papers 2007, Central Bank of Cyprus.
  • Handle: RePEc:cyb:wpaper:2007
    as

    Download full text from publisher

    File URL: http://www.centralbank.gov.cy/media/pdf/PBRPE_MEASURINGTHESIZEOFTHEINFORMALECONOMY_052007.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. J. J. Thomas, 1988. "The Politics of the Black Economy," Work, Employment & Society, British Sociological Association, vol. 2(2), pages 169-190, June.
    2. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
    3. 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.
    4. Panayiota Lyssiotou & Panos Pashardes & Thanasis Stengos, 2004. "Estimates of the black economy based on consumer demand approaches," Economic Journal, Royal Economic Society, vol. 114(497), pages 622-640, July.
    5. Keith Cowling, 2006. "Prosperity, Depression and Modern Capitalism," Kyklos, Wiley Blackwell, vol. 59(3), pages 369-381, August.
    6. Feinstein, Jonathan S, 1999. "Approaches for Estimating Noncompliance: Examples from Federal Taxation in the United States," Economic Journal, Royal Economic Society, vol. 109(456), pages 360-369, June.
    7. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    8. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages 632-652, November.
    9. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages 370-380, June.
    10. Dan Anderberg & Alessandro Balestrino & Umberto Galmarini, 2003. "Search and Taxation in a Model of Underground Economic Activities," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 647-659, October.
    11. Edgar L. Feige & Robert T. McGee, 2005. "Policy Illusion, Macroeconomic Instability And The Unrecorded Economy," Macroeconomics 0501027, EconWPA.
    12. 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.
    13. Chaudhuri, Kausik & Schneider, Friedrich & Chattopadhyay, Sumana, 2006. "The size and development of the shadow economy: An empirical investigation from states of India," Journal of Development Economics, Elsevier, vol. 80(2), pages 428-443, August.
    14. Andrew Dilnot & C. N. Miller, 1981. "What do we know about the black economy?," Fiscal Studies, Institute for Fiscal Studies, vol. 2(1), pages 58-73, March.
    15. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
    16. Bhattacharyya, Dilip K, 1999. "On the Economic Rationale of Estimating the Hidden Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 348-359, June.
    17. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 338-347, June.
    18. Dixon, Huw, 1999. "Controversy: On the Use of the 'Hidden Economy' Estimates," Economic Journal, Royal Economic Society, vol. 109(456), pages 335-337, June.
    19. J. J. Thomas, 1986. "The Underground Economy in the United States: A Comment on Tanzi," IMF Staff Papers, Palgrave Macmillan, vol. 33(4), pages 782-789, December.
    20. 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.
    21. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
    22. Enste, Dominik & Schneider, Friedrich, 1998. "Increasing Shadow Economies all over the World - Fiction or Reality?," IZA Discussion Papers 26, Institute for the Study of Labor (IZA).
    23. 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.
    24. repec:hrv:faseco:30728045 is not listed on IDEAS
    25. Feige, Edgar L., 1997. "Revised estimates of the Underground Economy: Implications of US Currency held abroad," MPRA Paper 13805, University Library of Munich, Germany.
    26. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ssi:jouesi:v:4:y:2016:i:2:p:183-197 is not listed on IDEAS
    2. repec:eee:quaeco:v:65:y:2017:i:c:p:61-70 is not listed on IDEAS

    More about this item

    Keywords

    Informal; grey and black economy; tax evasion; criminal activities;

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cyb:wpaper:2007. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Nicolaidou). General contact details of provider: http://edirc.repec.org/data/cbcgvcy.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.