Measuring the Informal Economy in the Caucasus and Central Asia

Author/Editor:

Yasser Abdih ; Leandro Medina

Publication Date:

May 31, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

Series:

Working Paper No. 2013/137

Subject:

Commodity markets Economic sectors Financial markets Informal economy Labor Self-employment Tax incidence Tax policy

English

Publication Date:

May 31, 2013

ISBN/ISSN:

9781484331613/1018-5941

Stock No:

WPIEA2013137

Pages:

18

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