Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013

48 Pages Posted: 31 Oct 2016

See all articles by Mai Hassan

Mai Hassan

University of Marburg - Center for Near and Middle Eastern Studies (CNMS)

Friedrich Schneider

Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Abstract

This paper is a first attempt to study the size and development of the shadow economies of 157 countries over 1999 to 2013. Using a MIMIC model, we find that higher tax and regulatory burden, unemployment and self-employment rates are drivers of the shadow economy, meaning that an increase of these causal variables increases the shadow economy. Our result also confirms previous findings of Friedrich Schneider, Andreas Buehn and Claudia Montenegro (2010). The estimated average of informality of 157 countries around the world, including developing, eastern European, central Asian and high income OECD countries averaged over 1999 to 2013 is 33.77% of official GDP. A critical discussion about the size of these macro-estimates comes to the conclusion that most likely the "true" shadow economy of these countries is only 69% of their estimated macro-MIMIC-values.

Keywords: shadow economies of 157 countries, quality of institutions, tax and regulatory burden, MIMIC model

JEL Classification: C51, C82, E26, E41, H11, H26

Suggested Citation

Hassan, Mai and Schneider, Friedrich G., Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013. IZA Discussion Paper No. 10281, Available at SSRN: https://ssrn.com/abstract=2861026

Mai Hassan (Contact Author)

University of Marburg - Center for Near and Middle Eastern Studies (CNMS) ( email )

Deutschhausstraße 12
Marburg, 35037
Germany

Friedrich G. Schneider

Johannes Kepler University Linz - Department of Economics ( email )

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Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Institute for the Study of Labor (IZA)

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