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A new estimation of the size of informal economy using monetary and full expenditures in a complete demand system

  • Armagan Tuna Aktuna Gunes


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • Christophe Starzec


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • François Gardes


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

We use the demand system approach to estimate the size of informal economy in Turkey following the methodology based on the analysis of the individual consumption behaviour proposed by Pissarides, Weber (1989), Lyssiotou et al. (2004), and Fortin et al. (2009). We extend this method by taking into account both the monetary expenditures and time spent on domestic activities. The necessary information of money and time inputs in consumption on the household's level is obtained by statistical match of Turkish Family Budget and Time Use surveys (2006). As expected, the estimated model size of the informal economy in Turkey using the full (time plus money) expenditure is higher than those obtained by only monetary approach (in average 40.6% and 33.5% of GDP respectively) and also higher than obtained by more conventional macroeconomic methods (for example 35.1% by Schneider in 2005 with DYMIMIC model).

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00841346.

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Date of creation: Jun 2013
Date of revision:
Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2013.53 - ISSN : 1955-611X. 2013
Handle: RePEc:hal:cesptp:halshs-00841346
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  1. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  2. 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 F360-69, June.
  3. 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.
  4. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, December.
  5. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  6. Reuben Gronau & Daniel S. Hamermesh, 2003. "Time Vs. Goods: The Value of Measuring Household Production Technologies," NBER Working Papers 9650, National Bureau of Economic Research, Inc.
  7. 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.
  8. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June.
  9. 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.
  10. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-40, Winter.
  11. Nurhan Davutyan, 2008. "Estimating The Size of Turkey’s Informal Sector: An Expenditure Based Approach," Working Papers 403, Economic Research Forum, revised May 2008.
  12. Bernard Fortin & Guy Lacroix & Dominique Pinard, 2009. "Évaluation de l'économie souterraine au Québec. Une approche micro-économétrique," Revue économique, Presses de Sciences-Po, vol. 60(5), pages 1257-1274.
  13. 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.
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