Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?

Abstract

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.

Where’s the Money? An Investigation into the Whereabouts and Uses of Australian Banknotes

“…Some studies, for example, Medina and Schneider (), suggest that Australia's shadow economy is much larger than our figures imply, and in the order of 10–15 per cent of GDP. We defer to the expertise of the ABS, who note that ‘estimates of the order of 15% of GDP for the underground economy are implausible’ (ABS 2013); Gyomai and van de Ven's () annex also contains a compelling critique of the econometric methods employed to estimate such large shadow‐economy shares.…”

Labor Laws and Shadow Economies: A Cross‐National Assessment

“…Medina and Schneider () created a global shadow economies data set using the multiple indicators and multiple cause (MIMIC) approach. The MIMIC relies on a structural equation in which underground economic activity is treated as an unobserved latent variable.…”

“…For a detailed, critical assessment of different methodological approaches to the operationalization of shadow sectors, among others, see Orsi, Raggi and Turino (), Elgin and Oztunali (), and Medina and Schneider ().…”

Ukrainian Economy De-Shadowing Reform as a Complex of Difficult Measures

“…для порівняння: у росії аналогічні показники становили 38,4% і 33,7%, латвії -22,2% і 16,6% (це найнижчий рівень серед країн колишнього срср), польщі -25,1% і 16,7% ввп. натомість у високорозвинених країнах (сШа, нідерланди, японія, Швейцарія, сінгапур) цей показник знаходиться в межах природного рівня (від 7% до 15% ввп) [3].…”