Does taking the shadow economy into account matter to measure aggregate efficiency?

Pierre-Guillaume Méon, Friedrich Georg Schneider () and Laurent Weill ()

No 07-18.RS, Working Papers DULBEA from Université libre de Bruxelles, Department of Applied Economics (DULBEA)

Abstract: We analyze how adding the shadow economy to official output figures affects estimated technical efficiency at the country level. We find that this only slightly affects the ranking of efficiency scores, but increases average efficiency in a sample of 87 to 97 countries, both developed and developing. Our results are robust to the functional form of the production technology and the adjustment of labour to account for years of schooling.

Keywords: shadow economy; income; aggregate productivity; efficiency. (search for similar items in EconPapers)
JEL-codes: O11 O17 O47 O5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-eff
Date: 2007-10
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Working Paper: Does taking the shadow economy into account matter to measure aggregate efficiency? (2007)
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