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

IMF Working Papers, January 24, 2018

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

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Bibliographic details

• Authors: Leandro Medina, Friedrich Schneider
• Published: January 24, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484338636.001

Overview

• Extended discussion of existing and new estimation methods of the shadow economy.
• New results presented for 158 countries covering 1991 to 2015.
• Strengths and weaknesses of methods are assessed and a critical comparison and evaluation of the methods is carried out.
• New micro estimates and structured hybrid-model based estimation procedures are compared with methods used by statistical offices and survey-based estimates.

Methods and methodological assessment

• Promising new macro methods:
  • Currency Demand Approach (CDA).
  • Multiple Indicators Multiple Causes (MIMIC) in a structured hybrid-model based estimation procedure.
• Other methodological references and techniques noted in keywords:
  • predictive mean matching (PMM).
  • the light intensity approach.
  • corrected shadow economy.
  • structural equation and MIMIC estimation details implied by terminology.
• Assessment focus:
  • Econometric strengths and weaknesses of new and existing methods.
  • Critical comparison and evaluation against micro estimates and statistical-office or survey-based estimations.

Key findings and statistics

• Coverage:
  • 158 countries.
  • Time period: 1991 to 2015.
• Average size:
  • The average size of the shadow economy of the 158 countries over 1991 to 2015 is 31.9 percent.
• Largest reported shadow economies (percent of GDP):
  • Bolivia: 62.3 percent.
  • Zimbabwe: 60.6 percent.
• Smallest reported shadow economies (percent of GDP):
  • Switzerland: 7.2 percent.
  • Austria: 8.9 percent.
• Publication metadata (document-level statistics):
  • Pages: 76.
  • Series: Working Paper No. 2018/017.
  • Issue: 017.
  • Volume: 2018.
  • DOI: https://doi.org/10.5089/9781484338636.001.
  • ISBN: 9781484338636.
  • ISSN: 1018-5941.

Implications and conclusions

• The new macro methods (CDA and MIMIC in a structured hybrid-framework) are promising from an econometric standpoint.
• These new estimations come quite close to estimates used by statistical offices or based on surveys, suggesting convergent validity across approaches.
• The comparative evaluation highlights methodological trade-offs and guides future refinement of both macro and micro estimation techniques.

Shadow Economies Around the World: What Did We Learn Over the Last 20 Years? — Leandro Medina; Friedrich Schneider; January 24, 2018.

Content in this bundle

• Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?, WP/18/17, January 2018
  • Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?, WP/18/17, January 2018 (Markdown version)
  • Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?, WP/18/17, January 2018 (PDF)