Professor Schneider's Shadow Economy: What Do We Really Know? A Rejoinder

Abstract

Professor Schneider’s “Comment” on my “Reflections” paper does not adequately address the key issues concerning the veracity of his findings, namely issues of documentation, normalization, calibration and replication. Further findings of inadequate documentation, suspicious normalization procedures, unexplained calibration errors and the inability to replicate the results; reinforces the conclusions of my original “Reflections” paper. Schneider’s Shadow Economy results suffer from conceptual flaws, arbitrary data manipulations and insufficient documentation for replication, questioning their place in the academic, policy and popular literature.

Keywords: Shadow Economy, tax evasion, non-observed economy, unobserved economy, Friedrich Schneider, MIMIC models

JEL Classification: E26, O17, H26, E41, C51, C82, K42