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The Anatomy Of The Underground Economy


  • Edgar L. Feige

    (University of Wisconsin-Madison)


The “underground economy” literature has generated a plethora of vague terms (shadow, hidden, subterranean) that have served to confuse rather than clarify the substantive issues raised by the finding that significant segments of economic activity may be imperfectly accounted for in the conventional data bases that form the foundation of empirical inquiry in economics. This paper outlines a taxonomic framework that clarifies the distinction between “unrecorded” and “unreported” economic activities and examines the appropriate empirical counterparts of these concepts. All too often, the under-recording of income in National Income and Product Accounts has been confused with the underreporting of income on tax forms. The concept of a “full compliance deficit” is introduced in order to distinguish between structural, cyclical and compliance components of budget deficit measures. Reference: The Unofficial Economy, Alessandrini and Dallago (eds.) Gower, 1987. pp. 83- 106.

Suggested Citation

  • Edgar L. Feige, 2005. "The Anatomy Of The Underground Economy," Macroeconomics 0502011, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0502011 Note: Type of Document - pdf; pages: 24

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    1. repec:aia:aiaswp:wp8 is not listed on IDEAS
    2. Edgar L. Feige & Vedran Šošiæ & Michael Faulend & Velimir Šonje, 2002. "Unofficial Dollarization in Latin America: Currency Substitution, Network Externalities and Irreversibility," International Finance 0205002, EconWPA.
    3. Klarita Gërxhani, 2007. "“Did You Pay Your Taxes?” How (Not) to Conduct Tax Evasion Surveys in Transition Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 80(3), pages 555-581, February.
    4. Adenutsi, Deodat E. & Yartey, Charles A., 2007. "Financial sector development and the macrodynamics of ‘de facto’ dollarisation in developing countries: the case of Ghana," MPRA Paper 29333, University Library of Munich, Germany.
    5. repec:aia:aiaswp:wp11 is not listed on IDEAS

    More about this item


    underground; unreported; unrecorded; non-observed; shadow; deficits; full compliance deficit; IRS; tax gap.;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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