We undertake an extended discussion of the latest developments about the existing and new estimation methods of the shadow economy. New results on the shadow economy for 158 countries all over the world are presented over 1991 to 2015. Strengths and weaknesses of these methods are assessed and a critical comparison and evaluation of the methods is carried out. The average size of the shadow economy of the 158 countries over 1991 to 2015 is 31.9 percent. The largest ones are Zimbabwe with 60.6 percent, and Bolivia with 62.3 percent of GDP. The lowest ones are Austria with 8.9 percent, and Switzerland with 7.2 percent. The new methods, especially the new macro method, Currency Demand Approach (CDA) and Multiple Indicators Multiple Causes (MIMIC) in a structured hybrid-model based estimation procedure, are promising approaches from an econometric standpoint, alongside some new micro estimates. These estimations come quite close to others used by statistical offices or based on surveys.
Motivation"The informal (shadow, black, unreported) economy comprises economic activities that circumvent costs and are excluded from the benefits and rights incorporated in laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit, and social systems" Feige (2005)
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.