Estimates of the Underground Economy in Australia

Abstract

In an age of tighter government regulation, many individuals and businesses are distorting our notion of the size of the Australian economy by actively participating in the underground economy. The consequences are clear: policy makers have imperfect knowledge on the state of economic affairs. Although there exists considerable international literature on the size of the underground economy, academics and public officials alike appear to have paid little attention to the extent of illicit economic behaviour in Australia. The aim of this paper is to provide the first known time‐series estimate of the size of the Australian underground economy and to illustrate that its existence has implications for the nature of the business cycle in Australia.

Shadow Economy in Tourism: Some Conceptual Considerations from Croatia

“…In seeking to understand the size of the world economy, Fleming et al (2000) argue that we are usually guided by official statistics on output, trade and investment, but omit to quantify the size of shadow economy due to complex methodology, scarce statistical data and much of controversies in its definition. To date, there is no consensus on the definition of shadow economy (Feige, 1990;Bajada, 1999;Caridi & Passerini, 2001). Since the term 'shadow economy' comprises various economic activities, contrasting them from doubtfully legal to completely illegal (see Table 1), it is difficult to provide formal definition.…”

Tax reforms and the underground economy: a simulation-based analysis

“…15 On the notion of 'moonlighting production', see e.g. Bajada (1999) and Cowell (1990). This scheme allows us to capture the fact that firms operate simultaneously in the official and in the unofficial sectors.…”

A Growth Model with Income Tax Evasion: Some Implications for Australia*

“…There is also a theoretical possibility that causality might run not from public investment to output and productivity, but the other way around (Fernald, 1999), which further adds to the mixed results. Bajada (1999), for example, estimates that tax evasion in Australia is as high as 15 per cent of gross domestic product (GDP), whereas Breusch (2005) argues that it is actually much smaller (approximately 2 per cent of GDP). According to Otto and Voss (1994a), the elasticity of the ratio of output to private capital with respect to the ratio of public to private capital in Australia exceeds 0.40, while Kam and Wang (2008) find it roughly equal to 0.35.…”

“…Hepburn (1992), Alm et al (1993), Andreoni et al (1998), Bajada (1999), Chen (2003) and Gupta (2004) all report tax evasion rates, which are quite substantial in magnitude even in developed economies. There is a large body of literature on the determinants of tax evasion, its magnitude, and its effects on welfare in both developing and developed economies.…”