Problems measuring the underground economy in transition¹

Abstract

An easy and popular method for measuring the size of the underground economy is to use macro data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the money demand and electricity demand equations, or at very least on knowledge of how these parameters are changing. We argue that the pace of change of these parameters is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable. We make our point by using Czech Republic and other transition country data from the financial and electricity sectors. Copyright (c) 2006 The Authors Journal compilation (c) 2006 The European Bank for Reconstruction and Development..

Religion, Culture, and Tax Evasion: Evidence from the Czech Republic

“…According to Hanousek and Palda [21], tax evasion is one of the central problems facing the governments of transition countries. Quite often, the system of taxation in those countries target narrow groups of wealthy people that are capable of endowing the state budget, which leads to inefficient system of taxation and low tax morale.…”

Discussion of Methods for Estimating the Shadow Economy

“…Jedná se o výběrová šetření mezi podniky a domácnostmi, jednou z těchto metod odhadovali stínovou ekonomiku v ČR např. Hanousek, Palda (2006). Další přímou metodou je sledování daňových úniků prostřed-nictvím daňových auditů, prováděných zejména v USA, Velké Británii a Švédsku, popsaných např.…”

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Consumption in the Dark: Estimating Unrecorded Expenditures of Households in Croatia

“…Estimations by Madžarević and Mikulić (1997) were included as a benchmark for Croatia in a comparative study of shadow economy conducted worldwide by Schneider and Enste (1998). Note: * Hanousek and Palda (2006) argued that the parameters of money demand and electricity demand are too varying in transition economies for the above estimation methods concerning the size of the underground economy to be used.…”