Entrepreneurship in the Underground Economy
Chapter 4: Estimating the Size and Growth of Underground Enterprise
INTRODUCTION Next time you receive your payslip, look at how much tax you have paid. If you work solely as an employee and have your tax withheld on a ‘pay as you earn’ basis, you are probably picking up part of the tab that others should be paying. But how much more tax are you paying because others do not? And is the amount growing or reducing over time? This chapter attempts to answer these questions by reviewing what is known about the magnitude of the underground economy and whether or not it is growing. Both for those exploring the underground sector for the ﬁrst time, as well as for more seasoned investigators, there is often a deep scepticism about whether it is possible to measure what is by its very nature a hidden phenomenon. Indeed, and as Table 4.1 displays, this scepticism appears at ﬁrst glance justiﬁed. In all nations, vast variations exist in the estimates of its magnitude. In the UK, for example, they range from 1 to 34 per cent of GDP and in the USA from 5 to 28 per cent. To understand these startling variations, this chapter evaluates the array of measurement methods that have produced these estimates. These range from indirect to direct techniques. At one end of the spectrum, that is, and for those assuming that research participants will not be forthcoming about whether or not they engage in underground work, evidence is sought indirectly in macroeconomic data collected and/or constructed for...
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