Chapter 3: The Non-Observed Economy vs. the Shadow Economy in the European Union: concepts, measurements methods and estimates revisited
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The Non-Observed Economy (NOE) vs. the Shadow Economy (SE) remains a controversial issue. Illegal, underground and informal activities encapsulated within the NOE/SE display large discrepancies throughout the European Union (EU). First, a tractable taxonomy of the aforementioned market activities is designed according to both definition and scope, whereupon a wide spectrum of estimation methods applies. Second, direct measurements from tax audits, household informal expenditure, labour market surveys and the cross-sectional Eurobarometer 2007 and 2013 provide piecemeal information regarding such unobserved activities. Third, indirect macroeconomic measurements are drawn from discrepancies on the market for goods and services, on the money market (cash/deposits and currency demand) and on the labour market (Labour Input Method) as well as from electricity consumption, whereas the structural modelling method (DYMIMIC, dynamic multiple indicators–multiple causes) carves the trends of the SE. Fourth, the estimates of the EU Shadow Economy drawn from the structural modelling method are compared with the assessment of the NOE according to national accounts adjustments; the relevance of major determinants of the NOE/SE tax burden as well as the characteristics of the informal workforce, are discussed.

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Edited by Jacques Charmes