Search results for: Shadow economy
Colin C Williams & Ioana Horodnic, World Economics, December 2020
Are participants in the undeclared economy rational economic actors who can be swayed by increasing the expected penalties and likelihood of detection? Or are they social actors who participate in reaction to a lack of vertical trust (in government) and horizontal trust (in others)? Evaluating a 2019 Eurobarometer survey, participation in undeclared work is weakly associated with the level of penalties, but there is a stronger, significantly greater likelihood of participation when there is a lower risk of detection and lower vertical and horizontal trust. The outcome is a call for the conventional repressive approach to be complemented with trust-building strategies.
Leandro Medina & Friedrich Schneider, World Economics, June 2020
The shadow or informal economy covers all economic activities which are hidden from official authorities for monetary, regulatory and institutional reasons. Although widely used, multiple indicator-multiple cause (MIMIC) models have been criticised, and we develop a modified model and database covering 157 countries over the years 1991 to 2017. We tested our model using satellite data on nocturnal light intensity as a proxy for the size of countries’ economies, and compared our results with the figures of 23 countries’ national statistical offices, finding stable and similar results. The average over all countries and over the whole period is 30.9% of GDP. The shadow economy is large in some regions (Latin America and sub-Saharan Africa) and there is sizeable heterogeneity within regions. On average, from 1991 to 2017 the shadow economy declined by 6.8%. In the short term the shadow economy has a negative impact on the official one and in the long term it has a positive effect.
Friedrich Schneider & Stefan D. Haigner, World Economics, September 2019
This paper describes and criticizes the MIMIC estimation method due to a double counting problem; a correction is suggested. The measurement methods used for National Accounts Statistics are discussed – the discrepancy method and two new micro survey methods – are described and a third, a micro method, using a combination of company manager surveys and their knowledge to calibrate the size of the shadow economy in firms, is presented. A detailed comparison of the four micro estimation methods with the MIMIC and the corrected MIMIC method are offered. One major result is that the corrected MIMIC method, especially, comes quite close to various types of lately developed micro survey methods.
George C. Georgiou, World Economics, September 2017
Money laundering is illegal world-wide and constitutes a significant economic inefficiency. Current anti-money laundering and combating the financing (AML/CFT) efforts are primarily driven by the threat of terrorism and drug-trafficking, but the majority of illicit money flows is due to fraud. This paper assesses the costs and benefits of controls on the efficiency of the financial system in modern advanced economies and the less developed economies of the world. The significant costs imposed on financial institutions, increasing levels of regulation and the minuscule illicit money flows intercepted has resulted in moral hazard and significant conflicts of interest.
Friedrich Schneider, World Economics, December 2011
In this paper, the main focus lies on the development and size of the shadow economy labour force in OECD, developing and transition countries. Besides informal employment in the rural and non-rural sector, other measures of informal employment like the share of employees not covered by social security, own account workers or unpaid family workers are also shown. The most influential factors on the shadow labour force are tax policies and state regulation, which, if they rise, increase both. Furthermore the discussion of the recent literature underlines that economic opportunities, the overall situation on the labour market and unemployment are crucial for an understanding of the dynamics of the shadow economy and especially the shadow labour force.
Friedrich Schneider, World Economics, December 2001
Estimates of the size of the shadow economy in 21 OECD countries are
presented. The average size of the shadow economy (as a percentage of ‘official’
GDP) over 1999/2000 in these countries is 16.7%. The author concludes that it is
the increasing burden of taxation and social security contributions, combined
with rising state regulatory activities, that are the driving forces for the recent growth in size of the shadow economy in the countries concerned.
Peter Reuter & Victoria Greenfield , World Economics, December 2001
The continuing demand for measures of the size of global drug revenues has
produced a supply of numbers that consistently overstate international financial
flows. This paper shows that, rather than $500 billion, the annual figure in trade
terms may be about $25 billion. As with many refined agricultural products, most
of the revenues go to distributors rather than to primary producing countries. The
authors explore the need for estimates of the global drug markets, address the
difficulties of obtaining ‘good’ numbers, and describe opportunities for
developing better estimates of flows and revenues. There are at least three
reasons for caring about the numbers: they can help to improve understanding of
the drug production and consumption problem and identify appropriate policy
Jim Thomas, World Economics, March 2000
One answer to the question "How Rich are We?" is to compare levels of National Income either across countries or for a single country over time. However, the relevance of this approach depends on how accurately National Income measures the output of goods and services of a country. While it is difficult to measure, the Black Economy represents the output of goods and services that is not generally captured in the National Income Accounts. This article discusses the problems of measuring the size of the Black Economy and speculates on the questions of who is involved and how. The relative importance of Tax Evasion versus Benefit Fraud is discussed.
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