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Abstract

This paper examines the measurement, size and implications of the Underground Economy in the US.
... First, the academic sphere began addressing this issue in the late 1970s. Feige (1979) blamed inaccurate statistical information for the fact that macroeconomics was unable to make adequate economic policy proposals. A decade later, measuring the hidden economy began to occupy the statistical offices of many countries. ...
... (Sík and Tóth, 1998;Dell'Anno, 2003;Belyó, 2008;Lackó et al., 2009) Others believe that in addition to these, the hidden economy also includes illegal activities, meaning the production, sale or possession of goods and services prohibited by law. (Schneider and Enste, 2004;Balogh, 2014;Csomós and Kreiszné, 2015;Bejaković, 2015) To give an example of different names referring to similar content, we would point out 'unobserved economy' as defined by Lackó et al. (2009) and 'irregular economy' of Feige (1979). These names further include barter transactions, activities performed under the guise of cooperative volunteer work, and services performed within households. ...
... Due to the issues mentioned above, most of the concepts remain in the form of a general description. One of the early definitions comes from Feige (1979), according to which the hidden economy includes economic activities that are unreported or cannot be measured using current measurement techniques. Another broad definition is that the hidden economy consists of all unregistered economic activities that contribute to the officially calculated GDP. ...
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Lately, economists and policymakers have been paying even closer attention to the hidden economy. Indeed, it makes a difference to the economy how much money goes into the state coffers. In order to uncover the hidden economy however, it is necessary to be familiar with its nature and manifestations. In this paper, with the aid of previous research and literature we attempt to illustrate the characteristics of the hidden economy in Hungary before and after the regime change and to map out the steps that have been taken to uncover it. This publication was preceded by a systematic literature review on the definition, causes, and effects of the hidden economy, consisting of the collection of both data and literature related to the domestic hidden economy. The following summarize the results from the synthesis of literature: The Hungarian hidden economy existed even before the regime change and took a variety of different forms. These include tips, bribes, informal payments, unauthorized work and patchwork, moonlighting, unauthorized rental of real estate, use of social property for personal gain, gains from the infringement of customs and exchange law, tax fraud by craftsmen and retailers, theft of public property, and corruption. Since 1990, not only have the dynamics of the hidden economy strengthened, but its types of activities have changed significantly as well. These include, but are not limited to: omitting a portion of revenue from the register; recognizing non-incurred material production costs among expenditures; including an excessive portion of personal household maintenance costs among production costs; organizing business and study trips abroad; finder’s fee; end-of-year depreciation or 'transfer' of inventories; wages of registered employees paid out of pocket; employment of unreported employees; parallel company formation; economic activity of unincorporated individuals and the income generated thereby. The following are among the concrete steps taken in recent years to uncover the Hungarian hidden economy: the temporary employment booklet; the simplified entrepreneurial tax; the Electronic Trade and Transport Control System; online cash registers; the connection of vending machines to the tax office.
... There are many definitions of shadow economy. According to Feige (1979), irregular economics is any economic activity that is not reported or not included in the measurements of economic activity. It is one of the most used definitions in the literature and will be the definition used in this research. ...
... The monetary method has been evolving and has been one of the most used methods to measure the informal economy, considering that it has been adapted to the circumstances of the countries and many of the variables used were changed, however the main idea has not. Gutmann (1977), Feige (1979), Tanzi (1980Tanzi ( , 1983, Schneider (1986Schneider ( , 1997, Hernandez (2009), Ardizzi et al. (2014, Goel et al. (2019) and others have used this method. Tanzi (1980Tanzi ( , 1983 presents annual estimates for the underground economy in the United States for the period 1930-80; in turn, he proposes a methodology for the calculation of the informal economy, which is also used in this research. ...
... Thus, the gap between measured GDP and potential GDP can be called informal sector. Since the discovery of the term "informal Overview of the Shadow Economy 7 sector" by Keith Hart (1971 ) and ILO (1972 ) it has been studied by different researchers with different names, for example, shadow economy ( Helberger andKnepel, 1988 andSchneider, 2000 ), informal economy , parallel economy ( Del Boca and Forte, 1982 ), underground economy ( Tanzi, 1980 andTucker, 1982 ), unobserved economy ( Schneider and Enste, 2000 ), hidden economy ( Feige, 1979 ), and illegal, unregistered and secret economy ( Chengelova, 2016 ). 8 The activities that are missing from a country's national income (GDP) are normally not subject to rules and regulations. The difference between unregistered economic activities and GDP shape actual or potential economy. ...
... By underground economy, Feige (1979Feige ( : p. 6, 1989 means "those economic activities transactions which unreported or are unmeasured by society's current techniques for observing economic activity". Taking hints from Feige's, the US Labor Department, in 1992, divided shadow economy in these parts: (i) unreported economy, where legal goods are traded but taxes are evaded; (ii) informal economy, in which economic activities take place but are neither regulated nor recognized by the authority, like social security systems, financial credit, and labor contracts violation; (iii) illegal economy, which is based on the selling and buying of prohibited goods and services, for instance, smuggling, corruption, and drugs; and (iv) unrecorded economy, which consists of such concealed revenuegenerating economic activities that are not included in GDP, like off-the-book's hiring of workers. ...
... The currency demand approach is usually classified among the indirect methods. The family of monetary methods traces its beginnings back to Cagan, Gutmann, and Feige [17][18][19]. This particular approach was popularised among economists by Tanzi [13]. ...
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