Measuring the model uncertainty of shadow economy estimates

Piotr Dybka, Bartosz Olesiński, Marek Rozkrut and Andrzej Torój
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Bartosz Olesiński: SGH Warsaw School of Economics
Marek Rozkrut: EY Economic Analysis Team

International Tax and Public Finance, 2023, vol. 30, issue 4, No 6, 1069-1106

Abstract: Abstract We derive the measurement error of the shadow economy estimates stemming from the currency demand model uncertainty. The choice of regressors can have a material and highly country-specific impact on the estimated level of the shadow economy. In consequence, one cannot attribute the same level of uncertainty to every country across the panel. Our extension of the Currency Demand Analysis, based on the frequentist and Bayesian model averaging procedures, makes the shadow economy measurements less arbitrary and more suitable for the evaluation of economic policies. We use our results to demonstrate the average shadow economy estimates as of 2014 for 64 countries, along with the confidence intervals.

Keywords: Shadow economy; Currency demand approach; Measurement error; Confidence intervals (search for similar items in EconPapers)
JEL-codes: C10 C51 C59 E26 H26 O17 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:30:y:2023:i:4:d:10.1007_s10797-022-09737-x

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DOI: 10.1007/s10797-022-09737-x

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