The Prevalence of Informal Work and Labour
Chapter 2: Measuring the shadow economy: a review of indirect methods
Estimating the size of a shadow economy is a difficult and challenging task. When measuring the shadow economy, two contrasting methods are used. On the one hand, there are direct survey methods. These are microeconomic approaches that largely use surveys. The main disadvantages of this method are the flaws of all surveys. For example, the average precision and results depend greatly on the respondents’ willingness to cooperate, it is difficult to assess the amount of shadow work from a direct questionnaire, most interviewees hesitate to confess to fraudulent behavior and responses are of uncertain reliability, which makes it difficult to calculate a true estimate (in monetary terms) of the extent of the shadow economy. On the whole, moreover, these surveys capture the shadow labour activities in households but rarely in or between firms and do not provide value-added figures. However, they have one considerable advantage; they provide detailed information about the structure of the shadow economy, as well as the socio-economic characteristics and motives of those who work in the shadow economy, even if the results are very sensitive to the way the survey is designed and the questionnaire is formulated (see Mogensen, 1985; Mogensen et al., 1995; Pedersen, 2003).
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