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Estimating the size and trends of the second economy in Zimbabwe

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  • Makochekanwa, Albert

Abstract

The second economy in Zimbabwe have grown from a low level of less than 10% of official GDP at independence in 1980 to an all time higher share of 70 percent in 2008 before subsiding to a still higher percentage share of 52% by end of 2009. Overall, the estimates obtained from this study are considerably higher than those obtained by most studies on African countries and this is not a surprise given that the country has experienced a prolonged decade long economic decline which resulted in GDP falling by more than 50 percent between 1999 and 2008. The existence of such a sizeable sector of unrecorded domestic and international economic transactions has several implications relevant for policy. First, it suggests that cconsiderable efforts will need to be made by the national accounts section in the Central Statistical Office (CSO) to establish systematic estimates of the major components of the second economy with a view of incorporating these into the official national accounts series. Second, coexistence of informal, parallel and black market activities in the second economy casts doubt on a blanket policy for the economy. Finally, the results suggest that the real total economy is healthier than the gloomy picture painted by official statistics.

Suggested Citation

  • Makochekanwa, Albert, 2010. "Estimating the size and trends of the second economy in Zimbabwe," MPRA Paper 37807, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37807
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    File URL: https://mpra.ub.uni-muenchen.de/37807/1/MPRA_paper_37807.pdf
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    References listed on IDEAS

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    1. Angel Alanon & M. Gomez-Antonio, 2005. "Estimating the size of the shadow economy in Spain: a structural model with latent variables," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 1011-1025.
    2. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    3. 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.
    4. Ahumada, Hildegart & Alvaredo, Facundo & Canavese, Alfredo J., 2006. "The Demand for Currency Approach and the Size of the Shadow Economy: A Critical Assessment," Berkeley Olin Program in Law & Economics, Working Paper Series qt6zn9p98b, Berkeley Olin Program in Law & Economics.
    5. Bevan, David & Collier, Paul & Willem Gunning, Jan, 1989. "Black markets: Illegality, information, and rents," World Development, Elsevier, vol. 17(12), pages 1955-1963, December.
    6. Mathew Kofi Ocran, 2007. "A Modelling of Ghana's Inflation Experience: 1960–2003," Research Papers RP_169 Key words: Ghana, , African Economic Research Consortium.
    7. Chiumya, Chiza, 2007. "The Parallel Economy in Malawi: Size, Effect on Tax Revenue and Policy Options," MPRA Paper 9860, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Second economy; trends;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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