Chapter 1: Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007
1 Friedrich Schneider, Andreas Buehn and Claudio E. Montenegro 1.1 INTRODUCTION Activities associated with shadow economies are facts of life around the world. Most societies attempt to control these activities through various measures such as punishment, prosecution, economic growth or education. To more effectively and efficiently allocate resources, it is crucial for a country to gather information about the extent of the shadow economy, its magnitude, who is engaged in underground activities, and the frequency of these activities. Unfortunately, it is very difficult to get accurate information about shadow economy activities, including the goods and labour involved, because individuals engaged in these activities do not wish to be identified. Hence, doing research in this area can be considered a scientific passion for ‘knowing the unknown’. Although substantial literature2 exists on single aspects of the hidden or shadow economy and comprehensive surveys have been written by Schneider and Enste (2000) and Feld and Schneider (2009; Chapter 2, this volume), the subject is still quite controversial as there are disagreements about the definition of shadow economy activities, estimation procedures utilized and the use of their estimates in economic and policy analysis.3 Nevertheless, there are some indications that the shadow economy has grown around the world, but little is known about the development and the size of the shadow economies in developing Eastern European and Central Asian (mostly former transition) countries, and high income OECD countries over the period 1999 to 2006/2007. The period was chosen as it has the most comprehensive data...
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