![Evolution of shadow economy (as percentage of gross domestic product [GDP]) by income group. Panel (a): low income. Panel (b): lower-middle income. Panel (c): upper-middle income. Panel (d): high-income, non-OECD. Panel (e): high income, OECD. Note. OECD ¼ Organisation for Economic Co-operation and Development.](https://www.researchgate.net/profile/James-Alm/publication/258175294/figure/fig1/AS:614224187375641@1523453866839/Evolution-of-shadow-economy-as-percentage-of-gross-domestic-product-GDP-by-income_Q320.jpg)
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Using Dynamic Panel Methods to Estimate Shadow Economies Around the World, 1984–2006
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The article estimates the size of shadow economy for 111 countries for the years 1984–2006 based on the currency demand approach. An important innovation is our use of dynamic panel data methods, which allows us to make several important contributions. First, we estimate the shadow economy for a range of heterogeneous countries that previously could not be included in the same regression. Second, we include variables that measure institutional quality in countries, including a variable that measures enforcement efforts. Third, we account for the persistence of currency demand as it evolves over time. Our results indicate a substantial shadow economy across countries, ranging from 10 to 86 percent of gross domestic product (GDP), with some tendency to grow over time. We also find that the shadow economy varies significantly by country income group. The mean shadow economy is 17 percent of GDP for Organisation for Economic Co-operation and Development (OECD) countries, 24 percent for non-OECD high-income countries, 33 percent for upper-middle-income countries, 37 percent for lower-middle-income countries, and 38 percent for low-income countries.
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... For example, Fjeldstad and Heggstad (2018) demonstrated the importance of internal audits and reporting timeliness in fostering accountability and improving revenue performance in East African local governments. De Simone and Flores (2019) found that accurate financial records significantly enhanced efficiency in local governments, while Alm and Embaye (2017) linked firm fraud prevention strategies to increased reliability and effectiveness in tax collection. These studies highlight the practical applicability of internal control systems in enhancing revenue collection performance. ...
... For instance, De Simone and Flores (2019) found that accurate financial records significantly enhanced the effectiveness and efficiency of revenue collection in local governments. Alm and Embaye (2017) demonstrated that strong monitoring and fraud prevention strategies were positively associated with increased reliability and effectiveness in tax collection. In the Tanzanian setting, Fjeldstad and Heggstad (2018) highlighted the importance of institutional mechanisms such as internal audits and reporting timeliness in improving revenue performance by fostering compliance and accountability. ...
... Fraud emerged as a critical barrier to revenue collection performance, negatively impacting increment, reliability, and efficiency scores. Fraudulent activities siphon resources, erode public trust, and disrupt revenue collection processes, as previously demonstrated by Slemrod (2019) and Alm and Embaye (2017). The study revealed that fraud impairs revenue growth, reduces reliability, and hinders efficiency, findings that are consistent with the work of Fjeldstad et al. (2018) and Moore (2020), who reported similar trends in other settings. ...
Local government authorities (LGAs) face significant challenges in revenue collection due to inadequate internal controls, leading to inefficiencies, fraud, and inconsistent reporting. This study investigates the effect of internal control systems on revenue collection performance within selected LGAs in Tanzania, namely Mbeya, Mwanza, and Manyara. Using a cross-sectional survey design, data were collected from 400 respondents across the three councils. Two Stage Least Square regressions were employed with the frequency of external audits as the instrument to control for endogeneity. The findings indicate that while certain internal control measures, such as financial record accuracy and internal audits, positively influence revenue effectiveness and reliability, challenges such as fraud and delayed reporting adversely affect revenue growth and operational efficiency. LGAs should enhance internal audit functions, improve financial record accuracy, strengthen fraud prevention, optimize reporting timelines, and enhance monitoring mechanisms through investment in technology and staff training. Policymakers should develop a standardized framework for internal controls, invest in technology infrastructure, encourage Public-Private Partnerships (PPP), and regularly review policies to ensure effective revenue collection in LGAs.
... Tuy vậy, Dell'Anno (2010) cho rằng, khu vực kinh tế chưa được quan sát bao gồm 3 khu vực chính là nền sản xuất ngầm, nền sản xuất không chính thức, và các hoạt động sản xuất bất hợp pháp. Theo đó, thu nhập từ các hoạt động này không được kê khai với cơ quan thuế, và không thể theo dõi được (Alm & Embaye, 2013). Tuy tồn tại nhiều quan điểm khách nhau nhưng khái niệm được sử dụng phổ biến thì khu vực kinh tế chưa quan sát là một khu vực mà các hoạt động kinh tế được tiến hành không chịu ảnh hưởng của thuế, luật định và các quy định thương mại. ...
Gánh nặng thuế cao có thể dẫn tới việc tăng quy mô khu vực kinh tế chưa được quan sát bởi khi đó, các cá nhân và doanh nghiệp có động cơ trốn thuế để giảm chi phí và gia tăng lợi nhuận. Tuy nhiên, một số nghiên cứu khác lại chỉ ra rằng, việc gia tăng gánh nặng thuế không đồng nghĩa với việc tăng lên quy mô khu vực kinh tế chưa được quan sát. Thông qua ước lượng mô hình hồi quy theo phương pháp bình phương tối thiểu tổng quát khả thi (FGLS), nhóm tác giả đã đánh giá tác động của gánh nặng thuế đến quy mô khu vực kinh tế chưa được quan sát trong thời gian từ 2002 đến 2020 tại nhóm các nền kinh tế mới nổi ở khu vực Châu Á bao gồm các quốc gia là Trung Quốc, Ấn Độ, Indonesia, Iran, Malaysia, Thái Lan, Ả rập Saudi, Philipines, Các tiểu vương quốc Ả rập thống nhất (UAE) và Việt Nam. Kết quả nghiên cứu đã chỉ ra rằng, gánh nặng thuế có tác động thuận chiều với quy mô khu vực kinh tế chưa được quan sát tại các nền kinh tế mới nổi ở Châu Á. Từ đó, nghiên cứu đưa ra hàm ý chính sách nhằm kiểm soát tốt gánh nặng thuế là một biện pháp hữu hiệu giúp quản lý tốt khu vực kinh tế chưa được quan sát. Ngoài ra, nghiên cứu cũng chỉ ra tác động ngược chiều của tỷ lệ thất nghiệp và lạm phát, tác động thuận chiều của độ mở thương mại đến quy mô khu vực này.
... More informality creates inefficient use of economic resources since the workforce in this sector is largely semi-or unskilled and less likely to adopt modern technology of production. In the same vein, Alm and Embaye [22] argue that the shadow economy distorts investment and aggravates misallocation of productive resources due to the hidden nature of operations in this sector. Accordingly, the shadow economy can introduce distortions into the official economy due to the inability of governments to regulate and account for its activities in the national accounts [23]. ...
This paper investigates the relationship between unemployment and the informal economy in Uganda. Using annual time series data from Uganda, covering the period from 1991 to 2017, we apply the ARDL method to investigate this relationship. The results indicate a positive and statistically significant relationship between unemployment and the shadow economy in both the long- and short-run. This implies that an increase in unemployment increases the shadow economy in both the long- and short-run. These findings reveal that a high level of unemployment is detrimental to the formal economy since it spurs informal sector activities in both the short-and long-run. These results suggest that any attempt to regulate unemployment without tackling informal sector activities may not succeed unless they are addressed simultaneously. Furthermore, the results also imply that curbing informality requires implementing fiscal, economic and political reforms aimed at ensuring proper functioning of the business environment.
... Hence, public policy usually aims at 1 National Health Fund of Poland. 2 SGH Warsaw School of Economics. Corresponding author: atoroj@sgh.waw.pl. ...
Currency Demand Analysis-one of the most popular macroeconometric techniques of shadow economy (SE) measurement-builds on equation explaining the share of cash in circulation in broader monetary aggregates, estimated as time series or panel regression. In the latter case, the homogeneity of slopes between panel units is usually assumed. We demonstrate that the data clearly reject this assumption with Pesaran-Yamagata test, and the resulting peril is using estimates obtained from inconsistent estimation for SE calculation. Due to an adverse T/N ratio, we refrain from using random coefficient or mean group estimators and propose the application of Regression Clustering and Classifier-Lasso procedures, splitting the sample in cross-sectional dimension into a limited number of homogeneous-coefficient groups, considerably smaller than N, whose number or composition remain unknown in advance. For both 2-group and 3-group partitioning, we find substantial differences between the relevant slopes, including the slopes of SE determinants impactful for SE measurement. Notably, a group dominated by Sub-Saharian and Central Asian economies exhibits higher sensitivity to all potential SE determinants: unemployment & inactivity rate, self-employment frequency and government effectiveness.
Kayıt dışı ekonomi, ekonomik faaliyette bulunan kişilerin hukuk kurallarına uygun davranışta bulunmaması, faaliyetlerini bu kuralara uygun olarak yürütmemesi ve denetim dışında bırakmaları gibi çok boyutlu bir durumu ifade etmektedir. Kayıt altına alınmayan ekonomik faaliyetleri ifade eden kayıtdışı ekonominin en önemli sonucu vergi kaybına neden olmasıdır. Kayıtdışı ekonomi ve neden olduğu vergi kaybı günümüzde hemen hemen tüm ülkelerin kronik bir sorunu haline gelmiş olup ekonomiler üzerinde büyük bir yük oluşturmaktadır. Kayıtdışı ekonominin ortaya çıkış nedenlerinin çok çeşitli ve karmaşık olması nedeniyle tespiti zordur. Aynı ülke ve aynı zaman dilimi için bile çeşitli çalışmalarda farklı sonuçlar vermesi de genel kanıya varılmasını zorlaştırmaktadır. Aslında bu durum sağlam bir teorik çerçevenin eksikliğinden kaynaklanabilir. Kayıtdışı ekonominin büyümesinin birçok nedeni vardır. Söz konusu nedenler; vergi oranları ve vergi yükünün yüksekliği, vergi denetimlerinin yetersizliği, vergi denetimlerinde uygulanan cezalarının caydırıcı olmaması, ekonomik krizlerin neden olduğu ekonomik dalgalanmalar, enflasyonun yüksekliği, mükelleflerin bireysel çıkarlarını ön planda tutarak vergi yükü minumum tutma çabaları, vergiden kaçınma faaliyetlerinin yaygınlığı, vergi aflarının yaygınlığı, vergi idarelerinin duyulan güven yetersizliği, mükellefin vergiye gönüllü uyumunun yetersizliği... Bu çalışmada Türkiye’de 1991-2017 yılları kayıtdışı ekonomi oranları veri alınarak vergi kaybı üzerindeki etkilerinin değerlendirilmesi amaçlanmıştır. Kayıtdışı ekonomi ve neden olduğu vergi kaybının tespitinin zorluğu ve verilerin yetersizliği nedeniyle bu çalışmada daha önce yapılan çalışmalardan faydalanılmıştır. Yapılan değerlendirme sonucu genel kanı kayıtdışı ekonominin ne kadar büyük ise vergi kaybının da o ölçüde büyük olduğu yönündedir. Kayıtdışı ekonomideki artış vergi yükünü arttırırak vergi kayıp ve kaçaklarında artışa yol açmaktadır. Artan vergi kayıp ve kaçakları da kayıtdışı ekonomiyi arttırmaktadır. Bu nedenle öncelikle kayıtdışı faaliyetler ve vergi kayıplarının önlenmesi için yapılacak olan düzenlemeler ile kayıtdışılığın azaltılması gerekir. Kayıtdışılığın azaltılmasının temel yolu da vergi denetimlerinin sıklaştırılması ve vergi cezaları ile caydırıcılığın sağlanması yönünde hukuki ve idari düzenlemelerin yapılmasıdır. Ayrıca mükelleflerin vergiye uyumunu sağlayacak yönde çalışmalar yapılmasıdır. Örneğin, sık sık uygulanan vergi afları ile vergiye gönüllü uyum sağlayan mükellefleri, vergisini zamanında ve eksiksiz ödeme konusunda şüpheye düşürmektedir. Vergi muafiyeti, vergi indirimi gibi türk vergi sisteminde yaygın uygulama alanı bulan vergi harcamalarının yoğunluğu da vergi kaybını arttırmaktadır. Bu noktada da bir kısıtlama getirilmesinde fayda görülmektedir. Sonuç olarak vergi kaybının en aza indirilebilmesi için öncelikle vergi kayıp ve kaçakları ile mücadele edilerek kayıtdışılığın azaltılması gereklidir.
Anahtar Kelimeler: Kayıtdışı ekonomi, vergi yükü, vergi kaybı, Türkiye
У статті проаналізовано латентні впливи незаконних практик - кіберзлочинів, корупції та операцій тіньового сектору - на діяльність суб’єктів економіки. Використовуючи дані бази Scopus та програмний додаток VOSviewer, виявлено п'ять кластерів ключових слів, які ідентифікують теоретичні напрями досліджень. Червоний кластер акцентує увагу на кіберзлочинах, штучному інтелекті та мережевій безпеці, підкреслюючи роль сучасних технологій у захисті бізнесу. Зелений охоплює тіньову економіку, висвітлюючи її вплив на економічний розвиток. Синя група зосереджується на прозорості, боротьбі з корупцією та якості управління. Жовтий і бузковий кластери розглядають етику, гендерні аспекти, цифровізацію та вплив пандемії. Аналіз практики показав реальні наслідки кібератак (Colonial Pipeline, Garmin, Maersk), корупційних скандалів (Petrobras, Siemens, Odebrecht) та криз, спричинених тіньовою економікою (HSBC, Volkswagen). Окреслено наслідки незаконних практик для України: кібератаки на державні й приватні установи демонструють уразливість цифрової інфраструктури; корупційні схеми, як-от ухиляння від мобілізації, підривають довіру до держави; тіньова економіка створює виклики для бізнесу, вимагаючи нових стратегій та регуляції. Результати аналізу теорії та практики підкреслюють актуальність боротьби з цими явищами для формування стійкого бізнес-середовища в країні.
This paper analyzes the hard-to-tax, asking the basic question: Why should the HTT matter to policy makers? In particular, we identify several areas in which we believe that the existence of the HTT may have significant economic effects, and we attempt to provide various informed, if only suggestive, estimates of the size of these impacts; that is, we focus on 'sizing' the problem of the HIT We find that the HTT can have a significant impact on tax revenues, especially for developing countries. We also find that a larger HTT sector leads to a greater reliance in tax structures on indirect taxation. The hard-to-tax seem to be associated with an array of welfare losses driven by the induced misallocation of resources, and these excess burdens can be quite large. The role of the HTT on long run economic development appears to be quite diverse; a larger size of the HTT tends to slow down economic growth in developing countries but it accelerates it in industrialized countries. Finally, we find that the impact of the hard-to-tax on equity is complicated by the final incidence of the forms of tax evasion represented by the hard-to-tax. Nevertheless, even though it may often be the case that HTT groups do not benefit directly from evasion because of the final incidence of this form of tax evasion, it seems uncontroversial that having the hard-to-tax pay their fair share of taxes will improve the overall equity of the tax system.
In the last decade, there are strong indications of an expansion in shadow economic activities in the Netherlands Antilles, which is caused by the high tax burden and high unemployment. This paper attempts to measure the size of the shadow economy of the Netherlands Antilles using two distinct estimation methods: the direct and indirect approach. Both methods produced similar results, showing the size of the shadow economy of the Netherlands Antilles to be approximately 11% of GDP.
Various methods to estimate the size of the shadow economy are discussed and the results of the shadow economy of 21 OECD countries are presented. Then the specific case of Italy is investigated and the aim of this section is to produce an estimate of the Italian shadow economy with the MIMIC (Multiple Indicators and Multiple Causes) method. The procedure to obtain the underground economy as a share of official GDP is presented. The paper ends with some general conclusions about the reliability of the model approach and the efficacy of economic policies to reduce the shadow economy.
The “difference” and “system” generalized method of moments (GMM) estimators for dynamic panel models are growing steadily in popularity. The estimators are designed for panels with short time dimensions (T), and by default they generate instruments sets whose number grows quadratically in T. The dangers associated with having many instruments relative to observations are documented in the applied literature. The instruments can overfit endogenous variables, failing to expunge their endogenous components and biasing coefficient estimates. Meanwhile they can vitiate the Hansen J test for joint validity of those instruments, as well as the difference-in-Sargan/Hansen test for subsets of instruments. The weakness of these specification tests is a particular concern for system GMM, whose distinctive instruments are only valid under a non-trivial assumption. Judging by current practice, many researchers do not fully appreciate that popular implementations of these estimators can by default generate results that simultaneously are invalid yet appear valid. The potential for type I errors—false positives—is therefore substantial, especially after amplification by publication bias. This paper explains the risks and illustrates them with reference to two early applications of the estimators to economic growth, Forbes (2000) on income inequality and Levine, Loayza, and Beck (LLB, 2000) on financial sector development. Endogenous causation proves hard to rule out in both papers. Going forward, for results from these GMM estimators to be credible, researchers must report the instrument count and aggressively test estimates and specification test results for robustness to reductions in that count.
The paper analyses the increasing relevance that the underground economy has taken on in the United States and in the political debate of the country. It then proceeds to estimate the size of the U.S. underground economy by estimating the demand for currency for underground transactions. To do so, the author employs a modified version of Cagan’s model, estimating the demand for such “illegal currency” from 1929 to 1976, the longest period for which data are available for the U.S at this time.
This paper presents estimates of the size of the informal economy in the United States and examines the motives individuals have for dealing in the informal economy.
The research reported used survey research techniques to measure the value of goods and services purchased from informal vendors over a one-year period. Respondents were also asked about their motives for purchasing from informal vendors and a limited amount about their own role as an informal vendor.
It is generally agreed that the published GDP (or GNP) series are subject to measurement errors. It is well known that the presence of these measurement errors has important consequences in empirical studies where GNP or national income appears as an explanatory variable. This will make any policies and plans derived from recorded GDP or national income ineffective. In this paper we suggest a method of estimating the omitted part of the GDP (or GNP) that is reflected by the currency in circulation to the public. Our approach is broadly similar to some of the earlier studies on the estimation of "tax-evaded income' through a currency demand equation, but the detailed treatment and modelling strategy is different, our method deviates from the existing literature by using observed variables for extracting information. The estimates obtained using our method have the advantage of testing theories of tax evasion without being conditioned by the variables under test. In Section I we present our general methodology and the interrelationship between the currency demand and the "hidden economy'. Section II is devoted to the description of the procedure of estimating the "hidden economy' by means of modified RESET proxies. The empirical implementation and the results, along with the diagnostic tests are presented in Section III. In Section IV, the estimated series is tested against a "Tax Evasion Theory' as a confirmatory test. In the concluding section we discuss briefly the generality of our method and its other possible uses. -from Author
In the past six years there has been a revolutionary development in economics. Six years ago, the subterranean economy — that broad area of productive economic activity which wholly escapes the ministrations of the tax collector and largely that of the statistician — simply did not exist, in the official view, in the perception of the public and among economists.