Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Innovation and productivity in formal and informal firms in Ghana

“…Moreover, during the survey administration, the local enumerators were trained to crosscheck this specific information based on the visit of the firm's premises and observing its activity. In our sample most of the firms (55 per cent) are active predominantly in the informal sector, a figure in line with other estimations of the informal establishments in Ghana and Sub-Saharan Africa (Institute of Statistical Social and Economic Research, 2013;Schneider et al, 2011). The remaining firms were similarly divided between semi-formal (23 per cent) and formal (22 per cent).…”

“…Moreover, it is characterized by small and inefficient firms, which are ran by poorly educated entrepreneurs and as a consequence its productivity is very low. Capturing the magnitude and impact of the 4 informal sector is problematic because of its intrinsic nature, but it has been estimated that the weighted average size of the shadow economy (as a percentage of GDP in the period [1999][2000][2001][2002][2003][2004][2005][2006][2007] in Sub-Saharan Africa around 40 per cent (Schneider et al, 2011) and up to 80 per cent of non-agricultural employment (Chen et al, 1999). The different firms' capabilities of formal and informal sectors are likely to shape the innovation adoption and diffusion.…”

The Modality of Fiscal Consolidation and Current Account Adjustment

“…Change in T/Change in G) and our proxy for tax evasion; this proxy is share of the shadow economy as percentage of GDP, which we draw from Schneider et al (2010). This interaction variable is not found to be statistically significant, although the modality of fiscal consolidation remains a significant determinant of the SR on its own.…”

Labor Market Institutions and Informality in Transition and Latin American Countries*

“…1.c Labor supply has positive elasticity but is not perfectly elastic Schneider et al (2010). Key independent variables: EPL measures stringency of employment protection legislation, TAX is the tax wedge on labor, BENEFIT is the size of unemployment benefits, BNFT_DUR is the duration of unemployment benefits, and DENSITY is union density.…”

“…The measure of informal economic activity is taken from Schneider et al (2010), the most comprehensive study to date. The data on institutions, which cover employment protection legislation (EPL), the tax wedge, the unemployment benefit level, unemployment benefit duration and union density, are assembled at the IZA (transition countries) and the World Bank (LAC countries).…”