Estimating The Size of Turkey’s Informal Sector: An Expenditure Based Approach
How extensive is the Turkish unofficial economy? An accurate answer to this question has considerable practical significance for various aspects of economic policy – particularly employment, fiscal and migration policies. Estimates based on macroeconomic data tend to be too imprecise. We utilize the most up to date household income and expenditure surveys to examine the extent of income underreporting among members of Turkey’s unofficial economy. The Pissarides-Weber (1989) approach that we use, hypothesizes that survey data would reflect income underreporting in the informal sector as “excess food consumption.” Since it relies on “marginal propensity to consume food”, this method allows comparisons across time and space, via Engel’s Law. Our results suggest that informal sector members spend more than their formal sector counterparts with the same level of reported income. Based on this information, we estimate the average size of the true informal sector income to be about 1.25 times the reported one. This implies the Turkish disposable income is (25%)*(83%) or about 21% larger than the official estimate based on reported magnitudes.
|Date of creation:||03 Jan 2008|
|Date of revision:||03 Jan 2008|
|Publication status:||Published by The Economic Research Forum (ERF)|
|Contact details of provider:|| Postal: 21 Al-Sad Al Aaly St. Dokki, Giza|
Web page: http://www.erf.org.eg
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Friedrich Schneider & Dominik Enste, 1999.
"Shadow Economies Around the World - Size, Causes, and Consequences,"
CESifo Working Paper Series
196, CESifo Group Munich.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World; Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
- André Sapir, 2006. "Globalization and the Reform of European Social Models," Journal of Common Market Studies, Wiley Blackwell, vol. 44(2), pages 369-390, June.
- André Sapir, 2005. "Globalisation and the reform of European social models," Policy Contributions 31, Bruegel.
- André Sapir, 2006. "Globalization and the reform of European social models," ULB Institutional Repository 2013/167139, ULB -- Universite Libre de Bruxelles.
- André Sapir, 2006. "Globalization and the reform of European social models," ULB Institutional Repository 2013/8112, ULB -- Universite Libre de Bruxelles.
- 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.
- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. Full references (including those not matched with items on IDEAS)