Size and causes of the underground economy in Spain: A correction of the record and new evidence from the MCDR approach

Michael Pickhardt and Jordi Sardà (jordi.sarda@urv.cat)

No 201280, Working Papers from Institute of Spatial and Housing Economics, Munster Universitary

Abstract: We review existing estimates of the size of the Spanish underground economy, apply the Ahumada et al. (2007, RIW) correction procedure to some of them and calculate the size of the underground economy in Spain for the period 1960 through 2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardà (2011, EJLE). We then extend the MCDR approach with respect to an analysis of the causes of the Spanish underground economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.

Keywords: underground economy; shadow economy; hidden economy; black economy; cash-deposit-ratio; currency demand approach; MIMIC approach (search for similar items in EconPapers)
JEL-codes: C22 H26 O17 (search for similar items in EconPapers)
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Size and causes of the underground economy in Spain: a correction of the record and new evidence from the MCDR approach (2015)
Working Paper: Size and causes of the underground economy in Spain: A correction of the record and new evidence from the MCDR approach (2011)
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