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