The Shadow Economy in OECD Countries: Panel-Data Evidence

Konstantin Kholodilin () and Ulrich Thiessen

No 1122, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In this paper, the extent of the shadow economy in OECD countries is investigated. The estimates of the size of the shadow economy are obtained using the panel-data techniques applied to the data on 38 OECD member states over the period 1991-2007. Our estimates tend to be somewhat lower than the alternative estimates. However, our and alternative estimates of shadow economy are quite well correlated - the corresponding correlation coefficients lie between 0.63 and 0.65. The only exception is our estimates for 2002 and those of Schneider et al. (2010) for 2002, for which a low correlation is observed. We find that the estimates of the size of the shadow economy are very sensitive to the assumption on the velocity of money circulation. It is shown that the micro- and macro-evidence are consistent at a relatively low velocity of money circulation.

Keywords: shadow economy; OECD countries; panel-data estimation (search for similar items in EconPapers)
JEL-codes: C51 E26 (search for similar items in EconPapers)
Pages: 23 p.
Date: 2011
New Economics Papers: this item is included in nep-cba and nep-eec
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Citations: View citations in EconPapers (1)

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