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Do Different Estimation Methods Lead to Implausible Differences in the Size of the Non-Observed or Shadow Economies? A Preliminary Answer

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  • Friedrich Schneider

Abstract

In this paper, first, six micro (4) and macro (2) estimation approaches are briefly described; they are the National Accounts Statistics discrepancy method and two new micro survey methods, a third one using a combination of company manager surveys and their knowledge to calibrate the size of the shadow economy in firms, and the consumption-income-gap of households method. The two macro methods are the MIMIC method and a structured hybrid method of the Currency demand and MIMIC models. Second, a detailed comparison of the results of four micro estimation methods with the macro MIMIC method are presented. One major result is that the estimated size of the shadow economy using the MIMIC method comes close to the size of the shadow economy of various types of recently developed micro survey methods. Third, using behavioral economics, some remarks are made about the reasons that individuals work in the shadow economy, and which estimation methods are best suited to apply this approach.

Suggested Citation

  • Friedrich Schneider, 2021. "Do Different Estimation Methods Lead to Implausible Differences in the Size of the Non-Observed or Shadow Economies? A Preliminary Answer," CESifo Working Paper Series 9434, CESifo.
    • Handle: RePEc:ces:ceswps:_9434
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    10. Benno Torgler, 2021. "Behavioral Taxation: Opportunities and Challenges," CREMA Working Paper Series 2021-25, Center for Research in Economics, Management and the Arts (CREMA).
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    Cited by:

    1. Massomeh Hajilee & Farhang Niroomand & Linda A. Hayes, 2023. "The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 539-566, September.
    2. Burgstaller, Lilith & Feld, Lars P. & Pfeil, Katharina, 2022. "Working in the shadow: Survey techniques for measuring and explaining undeclared work," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 661-671.
    3. Arezzo, Maria Felice & Horodnic, Ioana A. & Williams, Colin C. & Guagnano, Giuseppina, 2024. "Measuring participation in undeclared work in Europe using survey data: A method for resolving social desirability bias," Socio-Economic Planning Sciences, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    MIMIC estimation methods; macro and adjusted; micro survey method asking company managers; micro survey method using household data; using the consumption-income-gap; comparison of results of size of shadow economy of mostly OECD countries; shadow economy;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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