New Estimates for the Shadow Economies all over the World

Abstract

This paper presents estimations of the shadow economies for 162 countries, including developing, Eastern European, Central Asian, and high income OECD countries over 1999 to 2006/2007. According to our estimations, the weighted average size of the shadow economy (as a percentage of 'official' GDP) in Sub-Saharan Africa is 37.6%, in Europe and Central Asia (mostly transition countries) 36.4% and in high income OECD countries 13.4%. We find that an increased burden of taxation (direct and indirect ones), combined with (labour market) regulations and the quality of public goods and services as well as the state of the 'official' economy are the driving forces of the shadow economy.Shadow economy of 162 countries, tax burden, quality of state institutions, regulation, MIMIC model,

Causes of the Shadow Economy

“…): it is Schneider et al (2010), except for Serbia, for which see Chap. 4 of this study also the quality of the regulatory environment that is important.…”

Global financial governance and the informal: limits to the regulation of money

“…Nonetheless, measuring the size of the informal, or 'shadow', economy has been central to much of the research and publications of Friedrich Schneider, Professor of Economics at Johannes Kepler University, Linz, Austria. In a study assessing the size of the shadow economy over the period from 1999 to 2007 for a set of 162 states, the average for the period ranged from 66.1% (Bolivia) to 8.5% (Switzerland) [50]. Importantly for understanding the relative relationship between the prevalence of a sizeable informal economic sector with the global governance initiatives against money laundering, thirteen states were estimated to possess an economy with an informal sector comprising greater than 50% of official GDP, 136 states were estimated to have an informal sector forming between 15% and 50% of GDP, leaving thirteen states with an informal economy estimated at less than 15% of GDP ( [50], Table 2).…”

“…In a study assessing the size of the shadow economy over the period from 1999 to 2007 for a set of 162 states, the average for the period ranged from 66.1% (Bolivia) to 8.5% (Switzerland) [50]. Importantly for understanding the relative relationship between the prevalence of a sizeable informal economic sector with the global governance initiatives against money laundering, thirteen states were estimated to possess an economy with an informal sector comprising greater than 50% of official GDP, 136 states were estimated to have an informal sector forming between 15% and 50% of GDP, leaving thirteen states with an informal economy estimated at less than 15% of GDP ( [50], Table 2). In the view of some observers the contrast between a formal economy and these informal or shadow economies represents The Dark Side of Globalization containing forms of Deviant Globalization that are operating across Ungoverned Spaces [51][52][53].…”

The Concept of the Survey of Businesses and Entrepreneurs Operating Informally

“…5), which states that the shadow economy comprises all market-based legal production activities that are deliberately concealed from public authorities for one or more reasons: to evade payment of income, value added, or other taxes; to evade payment of social security contributions; to evade certain legal labour market standards, such as minimum wages, maximum working hours, safety standards, etc. ; and to evade certain administrative procedures, such as completing statistical questionnaires or administrative forms (Schneider et al 2010).…”