Estimating the Underground Economy using MIMIC Models
MIMIC models are being used to estimate the size of the underground economy or the tax gap in various countries. In this paper I examine critically both the method in general and three applications of the method by Giles and Tedds (2002), Bajada and Schneider (2005) and Dell’Anno and Schneider (2003). Connections are shown to familiar econometric models of linear regression and simultaneous equations. I also investigate the auxiliary procedures used in this literature, including differencing as a treatment for unit roots and the calibration of results using other data. The three applications demonstrate how the method is subjective and pliable in practice. I conclude that the MIMIC method is unfit for the purpose.
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.:
- 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.
- Trevor Breusch, 2005. "Australia's Cash Economy: Are the estimates credible?," Macroeconomics 0509025, EconWPA, revised 23 Sep 2005. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpem:0507003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.