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Measuring the unobservable: estimating informal economy by a structural equation modeling approach

Roberto Dell’Anno ()
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Roberto Dell’Anno: University of Salerno

Authors registered in the RePEc Author Service: Roberto Dell'Anno

International Tax and Public Finance, 2023, vol. 30, issue 1, No 8, 247-277

Abstract: Abstract This article proposes a new approach to estimate the informal economy (IE) by using Structural Equation Modeling (SEM). Using a Monte Carlo Simulation and empirical analysis of the Italian IE as an example, we provide general conclusions on the reliability and limitations of the SEM approach to estimate the IE. Practical guidelines on how to apply this method and the way to deal with the most problematic issues are provided. We conclude that the SEM approach may be effectively used, as a complementary method to the National Accounting Approach, to adjust official statistics for the presence of the IE.

Keywords: Informal economy; Shadow economy; Structural equation modeling; MIMIC approach (search for similar items in EconPapers)
JEL-codes: C39 H26 O17 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10797-022-09742-0

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