Entrepreneurship and the Shadow Economy

Entrepreneurship and the Shadow Economy

Edited by Arnis Sauka, Friedrich Schneider and Colin C. Williams

The shadow economy has become the focus of policy makers around the world. This timely book explores the relationship between entrepreneurship and the shadow economy by reviewing how to measure, explain and tackle this hidden enterprise culture. The editors bring together leading authorities in the field to examine existing methods to measure the shadow economy, explore entrepreneurship and shadow economy practices in various contexts, and provide policy suggestions for decreasing the shadow economy. It concludes by encouraging further research in this ever-growing field.

Chapter 2: Estimating the size of the shadow economies of 162 countries using the MIMIC method

Friedrich Schneider

Subjects: business and management, entrepreneurship, economics and finance, economics of entrepreneurship

Abstract

Estimations of the shadow economies for 162 countries are presented over 1999 to 2006–2007. According to these estimations, the estimated average size of the shadow economies (as a percentage of ‘official’ gross domestic product) in sub-Saharan Africa is 37.6 percent; in Europe and Central Asia (mostly transition countries) 36.4 per cent, and in high-income OECD countries 13.4 per cent. The tax burden combined with labour market regulations as well as the quantity and quality of public goods and services are the driving forces of the shadow economy. The estimations are done using the MIMIC estimation procedure, which is presented in this chapter and its strength and weaknesses discussed in detail.

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