Quantifying the shadow economy: measurement with theory
We construct a dynamic, general equilibrium model of tax evasion where agents choose to report some of their income. Unreported income requires using a payment method that avoids recordkeeping – cash. Trade using cash to avoid taxes is the theoretical measure of the shadow economy from our model. We then calibrate our model using money, interest rate and GDP data to back out the size of the shadow economy for a sample of 30 countries and compare our estimates to traditional ad hoc estimates. Our results generate reasonably larger estimates for the size of the shadow economy than exist in previous literature.>
|Date of creation:||2011|
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- Friedrich Schneider & Dominik Enste, 2000.
"Shadow Economies Around the World; Size, Causes, and Consequences,"
IMF Working Papers
00/26, International Monetary Fund.
- Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
- Christopher J. Waller, 2009.
"Random matching and money in the neoclassical growth model: some analytical results,"
2009-034, Federal Reserve Bank of St. Louis.
- Waller, Christopher J., 2011. "Random Matching And Money In The Neoclassical Growth Model: Some Analytical Results," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S2), pages 293-312, September.
- Feige, Edgar L, 1994.
"The Underground Economy and the Currency Enigma,"
Public Finance = Finances publiques,
, vol. 49(Supplemen), pages 119-136.
- Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
- Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 338-347, June.
- Edgar L. Feige, 2005. "Overseas Holdings Of U.S.Currency And The Underground Economy," Macroeconomics 0501022, EconWPA.
- 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.
- Koreshkova, Tatyana A., 2006. "A quantitative analysis of inflation as a tax on the underground economy," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 773-796, May.
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