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Indirect or Macroeconomic Methods in Measuring the Informal Economy

O. Nezhyvenko
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O. Nezhyvenko: National University of Kyiv-Mohyla Academy, Ukraine

Journal of Applied Management and Investments, 2019, vol. 8, issue 4, 201-215

Abstract: This paper aims to define and classify indirect methods of measuring the informal economy in broad. These are macroeconomic methods that are widely utilized to capture what is regarded as hidden from the official Gross Domestic Product. More particularly, the methods such as electricity consumption method, income-expenditure difference method, currency demand method, labour force participation rate, labour input method and structural (MIMIC) model are explained. Finally, a comparison of the five macroeconomic methods is demonstrated for the European Union countries. The paper concludes that the countries with the highest share of the informal economy are Greece, Cyprus, Romania, Bulgaria, Croatia, Italy and Latvia. The countries with the lowest informal economy are Austria, the United Kingdom, the Netherlands, Sweden and Luxembourg.

Keywords: informal economy; non-observed economy; shadow economy; indirect methods (search for similar items in EconPapers)
JEL-codes: E26 I32 J46 O17 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:ods:journl:v:8:y:2019:i:4:p:201-215