Edited by Michael Pickhardt and Aloys Prinz
Chapter 5: The Non-Observed Economy in the European Union Countries (EU-15): A Comparative Analysis of Estimates
Philippe Adair 5.1 ISSUES Since the beginning of the 1990s, the European Union (EU) has launched several studies on undeclared economic activities, whose common character lies in the fact that they escape social and tax regulations and statistical recording. The OECD has designed a framework in order to classify such activities as belonging to the so-called non-observed economy (NOE). There are (too) many words to encapsulate activities related to NOE within an economy e.g. ‘black, concealed, hidden, informal, non-observed, shadow, subterranean, unrecorded’, etc. Among scholars, the aforementioned terms are loosely used as mere synonyms, whereas different terms purport to capture different activities according to their scope. The field research has been expanding since the late 1970s. Thus a brief review of the landmarks of its history and major steps to achieve a tractable taxonomy is required (see Box 5.1). Beyond taxonomy, the NOE is a controversial issue on several grounds: definition and scope, and estimates as regards the magnitude as well as the trend of the NOE, upon which scholars disagree. How should the NOE be accounted for? Has the NOE been expanding until the late 1990s and declining since, or does it remain fairly stable? Does it represent a large or small share of GDP? Section 5.2 is devoted to definition and scope: the NOE is designed as a set of eight types liable to taxes that are encapsulated within five categories: the illegal economy or underground economy, as well as the informal economy, for statistical and economic reasons,...
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