Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, With an Application to<scp>I</scp>taly

Ardizzi, Guerino; Petraglia, Carmelo; Piacenza, Massimiliano; Turati, Gilberto

doi:10.1111/roiw.12019

Cited by 53 publications

(23 citation statements)

References 35 publications

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“…structural component (Ardizzi et al 2014) or the demand for cash explained by conventional or normal factors (Buehn and Schneider 2016) reflecting the need for a certain amount of cash to be used in normal economic activities; -'excessive' demand related to shadow market activities.…”

Section: First Step: Econometric Estimationmentioning

confidence: 99%

Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy

Dybka

Kowalczuk

Olesiński

et al. 2018

Int Tax Public Finance

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Model-based econometric techniques of the shadow economy estimation have been increasingly popular, but a systematic approach to getting the best of their complementarities has so far been missing. We review the dominant approaches in the literature-currency demand analysis and MIMIC model-and propose a hybrid procedure that addresses their previous critique, in particular the misspecification issues in CDA equations and the vague transformation of the latent variable obtained via MIMIC model into interpretable levels and paths of the shadow economy. We propose a new identification scheme for the MIMIC model, referred to as 'reverse standarization'. It supplies the MIMIC model with the panel-structured information on the latent variable's mean and variance obtained from the CDA estimates, treating this information as given in the restricted full information maximum likelihood function. This approach allows avoiding some controversial steps, such as choosing an externally estimated reference point for benchmarking or adopting other ad hoc identifying assumptions. We estimate the shadow economy for up to 43 countries, with the results obtained in the range of 2.8-29.9% of GDP. Various versions of our models remain robust as regards changes in the level of the shadow economy over time and the relative position of the analysed countries. We also find that the contribution of (a correctly specified) MIMIC model to the measurement of trends in the shadow economy is marginal as compared to the contribution of the CDA model, confirming the scepticism of some previous literature towards this method.

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Section: First Step: Econometric Estimationmentioning

confidence: 99%

Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy

Dybka

Kowalczuk

Olesiński

et al. 2018

Int Tax Public Finance

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“…18 See e.g. Harbaugh et al (2002), Durham (2004) and Ardizzi et al (2014). elasticities of ICT-and non-ICT capital.…”

Section: Capital and Labor Input Variablesmentioning

confidence: 99%

ICT and economic growth – Comparing developing, emerging and developed countries

2018

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. ICT and Economic Growth -Comparing Developing, Emerging and Developed CountriesThomas Niebel * ZEW MannheimDecember 2014 AbstractThis paper analyzes the impact of information and communication technologies (ICT) on economic growth in developing, emerging and developed countries. It is based on a sample of 59 countries for the period 1995 to 2010. Various panel data regressions confirm the positive relationship between ICT capital and GDP growth. The regressions for the subsamples of developing, emerging and developed countries do not reveal statistically significant differences of the output elasticity of ICT between these three country groups.

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“…Shadow economies have become a serious problem in developing countries, as they have been linked with crime (Schneider, 2004), drug dealing (Ardizzi et al, 2013) budget deficits (Dabla-Norris & Feltenstein, 2003) and human rights abuse (Donna, 2000). Naturally, rampant levels of shadow economies have deteriorating consequences for society as they lead to inefficient allocation of resources.…”

Section: Introductionmentioning

confidence: 99%

Intelligence and shadow economy: A cross-country empirical assessment

Salahodjaev

2015

Intelligence

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This paper empirically assesses the influence of intelligence on a shadow economy, using data from 158 countries, over the period 1999-2007. The results provide strong evidence for the claim that intelligence is negatively associated with an underground economy. This paper establishes that, on average, a one standard deviation increase in IQ is associated with an 8.5 percentage point reduction in a shadow economy relative to GDP. The negative effect of intelligence remains intact when controlled for conventional antecedents of a shadow economy.2

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Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, With an Application toItaly

Cited by 53 publications

References 35 publications

Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy

Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy

ICT and economic growth – Comparing developing, emerging and developed countries

Intelligence and shadow economy: A cross-country empirical assessment

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