Mission Implausible II: Measuring the Informal Sector in a Transition Economy Using Macro Methods

Jan Hanousek () and Filip Palda ()

Public Economics from EconWPA

Abstract: An easy and popular method for measuring the size of the underground economy is to use macro-data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the money demand and electricity demand equations, or at the very least on knowledge of how these parameters are changing. We argue that the pace of change of these parameters (such as velocity) is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable. We make our point by using the Czech Republic and other transition country data from the financial and electricity sectors.

Keywords: Underground economy; tax evasion (search for similar items in EconPapers)
JEL-codes: D6 D7 H (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-lam, nep-mac, nep-pbe and nep-tra
Date: 2004-04-06
Note: Type of Document - pdf; pages: 26. PDF file can be read or downloaded
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Related works:
Working Paper: Mission Implausible III: Measuring the Informal Sector in a Transition Economy using Macro Methods1 (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0404002

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