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Size and Development of the Shadow Economy of 31 European and 5 other OECD Countries from 2003 to 2012: Some New Facts

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In the Tables 1.1 to 1.4 the size and development of 31 European and of five non-European shadow economies over the period 2003-2012 is presented 1 . If we first look at the results of the average size of the shadow economy of the 27 European Union countries, we realize, that the shadow economy in the year 2003 was 22.3% (of official GDP), decreased to 19.3% in 2008 and increased to 19.8 % in 2009 and then decreased again to 18.4 % in 2012 (Table 1.1). If we compare the average of 31 European countries, in 2003 the average size was 22.4%, decreased to 19.4% in 2008, and increased to 19.9%in 2009 and decreased to 18.5 in 2012 (Table 1.2). If we consider the development of the shadow economy of Australia, Canada, Japan, New Zealand and the USA, we find a similar movement over time (see Table 1.3.); in 2012 these 5 countries had an average size of the shadow economy of 9.18%, in 2010 this value was 10.1%. If we consider the last 2 years (2011 and 2012) and compare them with the year 2008, we realize that in most countries we had again a decrease of the size and development of the shadow economy. This is due to the fact of the recovery from the world wide economic and financial crises. Hence the most important reason for this decrease is, that, if the official economy is recovering or booming, people have less incentives to undertake additional activi-ties in the shadow economy and to earn extra "black" money. The only exception is Greece, where the recession of the official economy is so strong, that it even reduced the demand of the shadow economy activities due to the severe income losses of the Greece people; the *) Prof. Dr. Dr.h. 1 The calculation of the size and development of the shadow economy is done with the MIMIC (Multiple Indica-tors and Multiple Courses) estimation procedure. As with the MIMIC estimation procedure one gets out only relative values, with the help of the currency demand approach for a few countries (Austria, Germany, Poland and Switzerland). These values have been calibrated into absolute ones. Source: Friedrich Schneider, Shadow Economy around the World: What do we really know?, European Journal of Political Economy, Vol. 21/2, Sep-tember 2005, page 598-642.
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Page 1 of 7
ShadEcEurope31_March 2012.doc
Size and Development of the Shadow Economy of
31 European and 5 other OECD Countries from 2003 to 2012:
Some New Facts
by
Friedrich Schneider
*)
In the Tables 1.1 to 1.4 the size and development of 31 European and of five non-European
shadow economies over the period 2003-2012 is presented
1
. If we first look at the results of
the average size of the shadow economy of the 27 European Union countries, we realize, that
the shadow economy in the year 2003 was 22.3% (of official GDP), decreased to 19.3% in
2008 and increased to 19.8 % in 2009 and then decreased again to 18.4 % in 2012 (Table 1.1).
If we compare the average of 31 European countries, in 2003 the average size was 22.4%,
decreased to 19.4% in 2008, and increased to 19.9%in 2009 and decreased to 18.5 in 2012
(Table 1.2). If we consider the development of the shadow economy of Australia, Canada,
Japan, New Zealand and the USA, we find a similar movement over time (see Table 1.3.); in
2012 these 5 countries had an average size of the shadow economy of 9.18%, in 2010 this
value was 10.1%.
If we consider the last 2 years (2011 and 2012) and compare them with the year 2008, we
realize that in most countries we had again a decrease of the size and development of the
shadow economy. This is due to the fact of the recovery from the world wide economic and
financial crises. Hence the most important reason for this decrease is, that, if the official
economy is recovering or booming, people have less incentives to undertake additional activi-
ties in the shadow economy and to earn extra “black” money. The only exception is Greece,
where the recession of the official economy is so strong, that it even reduced the demand of
the shadow economy activities due to the severe income losses of the Greece people; the
*)
Prof. Dr. Dr.h.c.mult. Friedrich Schneider, Department of Economics, Johannes Kepler University, Alten-
bergerst. 69, A-4040 Linz, Austria, Phone:+43 (0)732 2468-8210, Fax: +43 (0)732 2468-8209, E-mail: frie-
drich.schneider@jku.at, http://www.econ.jku.at/schneider
1
The calculation of the size and development of the shadow economy is done with the MIMIC (Multiple Indica-
tors and Multiple Courses) estimation procedure. As with the MIMIC estimation procedure one gets out only
relative values, with the help of the currency demand approach for a few countries (Austria, Germany, Poland
and Switzerland). These values have been calibrated into absolute ones. Source: Friedrich Schneider, Shadow
Economy around the World: What do we really know?, European Journal of Political Economy, Vol. 21/2, Sep-
tember 2005, page 598-642.
Page 2 of 7
Greek shadow economy will decrease to 22.5% of official GDP in 2012; a decrease of 1.4
percentage points compared to the year 2010!
Furthermore there are three different developments with respect to the size of the shadow
economy:
(1) The eastern countries or the new European Union members, like Bulgaria, like Cyprus,
like the Czech Republic, like Latvia, like Lithuania, like Poland have a higher shadow
economies than the “old” European Union countries, like Austria, Belgium, Germany, Ita-
ly; hence we have an increase of the size of the shadow economy from west to east.
(2) Also we observe an increase of the size and development of the shadow economy from
north to south. On average the southern European countries have considerable higher
shadow economies than the one in Central and Western Europe. This can also be demon-
strated looking at Figures 1 and 2.
(3) The five other highly developed OECD countries (Australia, Canada, Japan, New Zealand
and the United States in Table 1.3) have a much lower shadow economy about 10.1 % of
GDP average in 2009 which decreased to 9.2% in 2012.
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Figure 1: Size of the Shadow Economy of 31 European Countries in 2012 (in % of off. GDP)
Source: own calculations, March 2012
Size of the shadow economy (in % of GDP)
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Figure 2: Size of the Shadow Economy of 31 European Countries in 2011 (in % of off. GDP)
Source: own calculations, March 2012
Size of the shadow economy (in % of GDP)
Page 5 of 7
Table 1.1: Size of the Shadow Economy of 31 European Countries over 2003 – 2012 (in % of off. GDP)
Country / Year
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Austria 10.8
11
10.3
9.7
9.4
8.1
8.47
8.2
7.9
7.6
Belgium 21.4
20.7
20.1
19.2
18.3
17.5
17.8
17.4
17.1
16.8
Bulgaria 35.9
35.3
34.4
34
32.7
32.1
32.5
32.6
32.3
31.9
Cyprus 28.7
28.3
28.1
27.9
26.5
26
26.5
26.2
26
25.6
Czech Republic 19.5
19.1
18.5
18.1
17
16.6
16.9
16.7
16.4
16.0
Denmark 17.4
17.1
16.5
15.4
14.8
13.9
14.3
14
13.8
13.4
Estonia 30.7
30.8
30.2
29.6
29.5
29
29.6
29.3
28.6
28.2
Finland 17.6
17.2
16.6
15.3
14.5
13.8
14.2
14
13.7
13.3
France 14.7
14.3
13.8
12.4
11.8
11.1
11.6
11.3
11
10.8
Germany 17.1
16.1
15.4
15
14.7
14.2
14.6
13.9
13.7
13.3
Greece 28.2
28.1
27.6
26.2
25.1
24.3
25
25.4
24.3
24.0
Hungary 25
24.7
24.5
24.4
23.7
23
23.5
23.3
22.8
22.5
Ireland 15.4
15.2
14.8
13.4
12.7
12.2
13.1
13
12.8
12.7
Italy 26.1
25.2
24.4
23.2
22.3
21.4
22
21.8
21.2
21.6
Latvia 30.4
30
29.5
29
27.5
26.5
27.1
27.3
26.5
26.1
Lithuania 32
31.7
31.1
30.6
29.7
29.1
29.6
29.7
29.0
28.5
Luxemburg (Grand-Duché) 9.8
9.8
9.9
10
9.4
8.5
8.8
8.4
8.2
8.2
Malta 26.7
26.7
26.9
27.2
26.4
25.8
25.9
26
25.8
25.3
Netherlands 12.7
12.5
12
10.9
10.1
9.6
10.2
10
9.8
9.5
Poland 27.7
27.4
27.1
26.8
26
25.3
25.9
25.4
25
24.4
Portugal 22.2
21.7
21.2
20.1
19.2
18.7
19.5
19.2
19.4
19.4
Romania 33.6
32.5
32.2
31.4
30.2
29.4
29.4
29.8
29.6
29.1
Slovenia 26.7
26.5
26
25.8
24.7
24
24.6
24.3
24.1
23.6
Spain 22.2
21.9
21.3
20.2
19.3
18.4
19.5
19.4
19.2
19.2
Slovakia 18.4
18.2
17.6
17.3
16.8
16
16.8
16.4
16
15.5
Sweden 18.6
18.1
17.5
16.2
15.6
14.9
15.4
15
14.7
14.3
United Kingdom 12.2
12.3
12
11.1
10.6
10.1
10.9
10.7
10.5
10.1
27 EU-Countries / Average
(unweighted) 22.3
21.9
21.5
20.8
19.9
19.3
19.8
19.5
19.2
18.4
Source: Own Calculations, March 2012
Page 6 of 7
Table 1.2: Size of the Shadow Economy of 4 European Countries (Non EU-Members) over 2003 – 2012 (in % of off. GDP)
Country / Year 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Croatia 32.3
32.3
31.5
31.2
30.4
29.6
30.1
29.8
29.5
29.0
Norway 18.6
18.2
17.6
16.1
15.4
14.7
15.3
15.1
14.8
14.2
Switzerland 9.5
9.4
9
8.5
8.2
7.9
8.3
8.1
7.8
7.6
Turkey 32.2
31.5
30.7
30.4
29.1
28.4
28.9
28.3
27.7
27.2
Non EU-Countries / Avera-
ge 23.2
22.9
22.2
21.6
20.8
20.2
20.7
20.3
19.9
19.5
Unweighted Average of all
31 European Countries 22.4
22.1
21.6
20.9
20.1
19.4
19.9
19.7
19.3
18.5
Source: Own Calculations, March 2012
Table 1.3: Size of the Shadow Economy of 5 Highly Developed Non- European Countries over 2003 – 2012 (in % of off. GDP)
Country / Year 2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Australia 13.7
13.2
12.6
11.4
11.7
10.6
10.9
10.3
10.1
9.8
Canada 15.3
15.1
14.3
13.2
12.6
12
12.6
12.2
11.9
11.5
Japan 11
10.7
10.3
9.4
9
8.8
9.5
9.2
9
8.8
New Zealand 12.3
12.2
11.7
10.4
9.8
9.4
9.9
9.6
9.3
8.8
United States USA 8.5
8.4
8.2
7.5
7.2
7
7.6
7.2
7
7.0
Other OECD Countries /
Unweighted Average 12.16
11.92
11.42
10.38
10.06
9.56
10.1
9.7
9.46
9.18
Source: Own Calculations, March 2012
Page 7 of 7
Table 1.4: Size of the Shadow Economy of Various Unweighted Averages over 2003 – 2012 (in % of off. GDP)
Averages / Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
27 EU-Countries / Average
(unweighted) 22.3
21.9
21.5
20.8
19.9
19.3
19.8
19.5
19.4
18.4
4 Non EU-Countries / Average
(unweighted) 23.2
22.9
22.2
21.6
20.8
20.2
20.7
20.3
20.0
19.5
5 Other OECD Countries / Average
(unweighted) 12.2
11.9
11.4
10.4
10.1
9.6
10.1
9.7
9.5
9.18
All 36 Countries / Average
(unweighted) 19.2
18.9
18.4
17.6
16.9
16.3
16.9
16.5
16.3
15.7
Source: Own Calculations, March 2012
... In Equation (3), SE i,t is the size of shadow economy in Greece i in year t, η t is the value of shadow economy index in Greece i in year t, η * 2004 is the average value of the shadow economy index in Greece in 2004, andSE * 2004 is the size of Greece"s whole shadow economy in 2004 as estimated by Schneider (2015); its value is 28.1%. Taking into account all determinants in model 5 as causes, we can estimate the size of the shadow economy in Greece presented in Table 4. ...
... We chose MIMIC model because its flexible, containing causes and indicators (Schneider, 2015) of Greek economy"s situation over the period 2000-2018. Its determinants focused on domestic problems (tax and social security burden, corruption and institutional quality, regulations, official economy, income inequality and poverty, self-employment etc) as well as data about epidemic crisis. ...
... Initially, researchers used Currency Demand Approach (Vavouras et al., 1990;Negreponti-Delivani, 1991;Tatsos et al., 2001;Schneider and Enste, 2000) with average size of 24.38% for the period 1958 -1997. In the following years, the mostly used method is MIMIC model (Dell" Anno et al., 2007;Buehn and Schneider, 2012;, Schneider, 2015, Reimers et al., 2020 with size ranged from 22.4% to 29%, over the period 1968-2019. In few studies (Pavlopoulos, 1987;Dellas et al., 2017;Kanellopoulos et al., 1995;Manolas and Vavouras, 2001;Schneider, 2004;Medina and Schneider, 2017, Alarcon-Garcia et al. 2020, Szulc-Obloza, 2020Remeikiene et al., 2019;Remeikiene et al., 2014) was found an increase average size up to 34,95%. ...
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Greek economy suffers from economic crisis for over a decade. A continuing problem has been the persistence of a large shadow economy which results in a gap between the tax and social security contribution owed and collected. In this paper, the size of shadow economy (SE) in Greece is estimated using a flexible MIMIC approach with time series data from 2000 to 2018. Our variables focused on instead of in most representative data of the Greek economy as causes (e.g. unemployment, self-employment, epidemic etc.) and indicators (official economy, energy consumption, income inequality and poverty, labour force participation). We found that the average size of shadow economy in Greece was up to 37.63% for the reference period, above the average size of other studies up to 23.35%. The study focuses on the significance of each determinant of the shadow economy, resulting in an improved estimation method to identify and tackle shadow transactions and increase public revenues. JEL Classification: O17, C20, D73, E26.
... Numerous studies have debated the shadow economy phenomenon, which, in turn, reflects the significance of this matter to economists. Earlier studies used both direct methods (survey methods) and indirect methods, which include the indicator approach and the model as a latent approach, which is a statistical method such as the Multiple Indicator Multiple Cause model (MIMIC) (For further details on the different benchmarking procedures, see [17,18].) to estimate the shadow economy (We will not go into great detail about the various methods for measuring a shadow economy (including the MIMIC method) due to the vast amount of literature available.). The shadow economy is determined by a variety of factors. ...
... Schneider's empirical results [17] indicated that the primary factors contributing to the growth of the shadow economy in 31 European nations and five additional OECD countries from 2003 to 2014 were tax policy and national regulation. They observed that the size of the shadow economies was 22.6 % of official GDP in 2003, but had decreased to 18.6 % in 2014. ...
... This paper relies on the previous studies to select all potential variables that are deemed as a significant factors determining the shadow economy [3,13,17,18,21,23,24]. Some of the shadow economy causes have been widely used in the previous related studies, such as tax burden, unemployment rate, inflation, interest rate, population, and the remainder of the explanatory variables have been used one or two times in the previous studies (see Table A1 in the Appendix A). ...
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The purpose of this paper was to identify the leading causes determining the shadow economy at the global level. The empirical analysis used was the Sala-i-Martin version of extreme bounds analysis (EBA) applied to a cross-sectional sample of 132 countries. The results suggested that the quality of institutions is the primary determinant of the shadow economy. The results showed that only four out of six factors of the quality of institutions proved to be robust determining factors of the shadow economy; they are bureaucracy quality, law and order, corruption, and internal conflict. Moreover, monetary freedom and secured property rights are also robust and negatively related to the shadow economy. An interesting result is that information and communication technology (ICT) development is vital to the shadow economy. Mainly, internet usage is robust and negatively associated with the shadow economy. Furthermore, inflation and poverty emerge as key determining factors of the shadow economy. Our findings will aid in the development of recommendations for potential strategies to minimize the international extent of the shadow economy.
... At the other end are the countries of Eastern Europe, among which the best example is Bulgaria, which, despite its relatively low tax rates, has been struggling with the SE for years. This situation also leads to a higher budget deficit and public debt, further stimulating the growth of the SE (Schneider et al., 2015;Gonzalez-Fernandez & Gonzalez-Velasco, 2015). The economic position of both citizens and economic entities is deteriorating due to the country's credit rating declining and worsening the macroeconomic situation (in particular because austerity measures are implemented in such circumstances); as a result, citizens and economic entities are becoming more involved in the informal sector. ...
... Most authors, who investigated the post-crisis period, considered this timespan (Huidumac-Petrescu & Stan, 2019;Miklaszewska & Kil, 2016;Ziolo et al., 2017;Mihai & Oprea, 2015). Also, Schneider (2015) argued that the recovery from the worldwide economic and financial crises started in 2015, contributing to the subsequent economic development and a decrease in the size of the SE. ...
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The shadow economy (SE) is a global phenomenon that affects every country. However, its forms and mechanisms may differ depending on a country's socio-economic characteristics. The major characteristic is a country’s economic system. Hence, market and transition economies can be affected differently. Given that the size of the SE directly affects the level of tax revenue, it is particularly important to investigate the factors of the SE during the post-crisis period, when policymakers need sufficient budgetary funds to implement anti-crisis measures. In that sense, this paper aims to identify the differences in the factors that boosted the SE in 17 market and 19 transition economies in Europe between 2009-2014. The research is based on the PLS-SEM method. A country’s wealth and development, market openness, tax system and political environment are employed as the major SE factors. These factors are the most common in previous literature when investigating the issues of the shadow economy and are most appropriate for this research. The results suggest that particular factors of the SE differently affect market and transition economies. In transition economies, a favourable political environment, greater wealth and development, as well as a lower tax burden contribute to a smaller size of the SE, whereas greater market openness and a higher tax burden lead to a larger size of the SE. The links between market openness, tax system and the SE are not, however, statistically significant. Like transition economies, market economies are characterized by the positive impact of political environment and wealth and development when combating the SE. Unlike in transition economies, the size of the SE in market economies is reduced by a high tax burden and greater market openness. In the latter case, there is only one statistically insignificant path coefficient – it represents the relationship between the SE and market openness. The Multi-Group Analysis (MGA) method was employed to compare the path coefficients estimated for the country groups under consideration. The results indicate that the only difference in the path coefficients representing the relationship between market openness and the SE is not statistically significant. Based on the research results, some recommendations for policymakers in transition and market economies are provided in the conclusion.
... E.g. Thomas (1992), Johnson, Kaufmann, (1998a,b), Giles (1999a), Tanzi (1999), Schneider (2003, 2005, Buehn and Schneider (2012) ...
... Τέλος, τα μοντέλα λανθανουσών μεταβλητών επιτρέπουν να αποκαλυφθεί ο αντίκτυπος της εργασίας, της παραγωγής και των χρηματαγορών, σχετικά με τη συνολική έκταση της παραοικονομίας, χρησιμοποιώντας πολλαπλές μεταβλητές. Γενικότερα, οι μέθοδοι άμεσης προσέγγισης λαμβάνουν υπόψη τους οικονομικές μεταβλητές (νοικοκυριά, επιχειρήσεις), οι έμμεσοι βασίζονται στην αξιολόγηση της γενικής οικονομίας ή νομισματικής, του κύκλου εργασιών του χρήματος, της κατανάλωσης ηλεκτρικής ενέργειας και την αγορά εργασίας και τέλος η μέθοδοί των λανθανουσών μεταβλητών, λαμβάνουν υπόψη το μείγμα της γενικής οικονομίας, φορολογίας, νομικών, κοινωνικών, αγορών εργασίας και νομισματικών δεικτών (Gaspareniene, L., & Remeikiene, R., 2016 Σύμφωνα με τις μελέτες του F. Schneider (2013Schneider ( , 2015, σχετικά με την έκταση της (Βαβούρας Ι., Κούτρης Α., 1991). Οι Βαβούρας Ι., Κούτρης Α., (1991) (στηριζόμενοι στη μελέτη των Βαβούρα, Καραβίτη και Τσούχλου, 1990) αναφέρουν ότι η μέση τιμή ως ποσοστό του ΑΕΠ της υπό εξέτασης περιόδου ανερχόταν σε 24,6%, (Βαβούρας Ι., Κούτρης Α., 1991) ή περίπου το 30% του ΑΕγχΠ, το υψηλότερο ποσοστό μεταξύ των χωρών μελών του ΟΟΣΑ (Βαβούρας Ι., 1995). ...
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The limitation of underground economy and tax Evasion, has gained momentum in the last decade, not only at the worldwide supervised authorities, but also between the national policy making authorities, this fact is indicated from the amount of lawmaking initiatives to this direction. Throughout the literature review, it is clear that the definitions of underground economy and tax evasion, do not match but coexist, while underground economy and national economy, have a high rate of interdependence due to the fact that, they are active in the same socioeconomic environment. That means, people who act within the boundaries of social economy, may act under the underground’s economy prism as well. Moreover, it has been proved that, the integration of our country αt the Excessive Deficit of the Stability and Growth Pact Procedure, as a result of debt crisis, has drastically reduced the amounts of Underground economy and tax evasion, but not enough compared to other European countries. As a result, the effects of those incidents at the economic and fiscal policy, still hurt the Greek economy and make absolutely necessary to have a reliable assessment of it and to take measures to limit. For further expansion of the trends of this phenomenon, observation study on a representative sample of tax administration Auditors, has been held (n=124), using questionnaires, so that public officials’ in audit positions beliefs, will be examined in comparison with underground economy and tax evasions acts. Also the results of those acts, not only to the economy and to the national fiscal, but also their beliefs regarding the importance of their contribution, as an effort to limit down the phenomenon. Under the prism of the empirical study, we observe that, during the period Greece was under strict fiscal surveillance, the amount of underground economy and tax evasion has increased. The most common acts of underground economy ,as per questioned auditors are the illegal unregistered in-home services, drug and weapon dealing, woman trafficking, illegal immigrant street sellers, illegal betting and unregistered second part or full time jobs .While Greeks tax evade , when they do not publish tax documents, when they under or over-invoice, when they deliberately ignore or inaccurately declare taxes or finally via false transactions (false documents).
... This includes activities located at the edge of the law, which speculate on the existing legal framework for a biased interpretation, in order to reduce the tax obligations due as a result of the application of legal or economic/accounting artifices. Overall, the underground economy consists of two main components (Schneider, 2013), namely undeclared work to avoid taxation and unreported business income, in order to avoid the tax burden. In an attempt to measure the underground economy, the literature (Schneider, 2013) is limited only to legal activities, without including aspects related to illegal activities (drug trafficking, prostitution, smuggling, money laundering, etc) or own production for self-consumption. ...
... Overall, the underground economy consists of two main components (Schneider, 2013), namely undeclared work to avoid taxation and unreported business income, in order to avoid the tax burden. In an attempt to measure the underground economy, the literature (Schneider, 2013) is limited only to legal activities, without including aspects related to illegal activities (drug trafficking, prostitution, smuggling, money laundering, etc) or own production for self-consumption. ...
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Since 1970, the intensity of implementing budgetary policies in the two categories of states, developed states, and emerging states, has been observed in Europe. These policies had the effect of increasing the levels of taxation, also called progressive taxation, at that time. To stop this phenomenon of progressive taxation, the Maastricht Treaty and then the Stability and Growth Pact have had the effect of forcing states to adopt different fiscal policies to reduce the feeling of fiscal pressure made necessary by budgetary deficiencies and public debt accumulated over time. In fact, since the 1990s, each Member State of the European Union has interpreted the treaties mentioned above separately; some states reduced spending, while others preferred to impose more significant fiscal pressure on citizens by raising taxes and fees. In our article, we analyze and disseminate the general fiscal pressure of some developed countries in the European Union. We identify the economic priority indicators that influence the phenomenon of fiscal pressure, such as the level of direct taxes, indirect taxes, the growth rate of gross domestic product, and the level of public debt, providing an overview of economic development over the last three decades.To this end, the authors have developed an econometric model that captures the factors that influence the fiscal pressure in several developed countries of the European Union in the period 1995-2018.
... Although this is largely a task for local, regional, and national authorities, the EU could play an important role in promoting this development by requiring members to comply with their commitments in the various treaties. 7 To the extent that economic actors can compensate for weaknesses in these institutions, they will do so by undertaking more activity off-the-books; as a result, member countries that perform poorly in these respects have larger underground economies (Schneider 2015). In Bulgaria and Romania, the shadow economy is approximately 30 percent of official GDP, while in Northern European countries, the proportion is less than half of that. ...
... The results presented evidence that labor freedoms, tax rates, and business freedoms have significantly influenced the shadow economies of these Asian countries. Schneider (2015) applied the MIMIC approach to gauge the nature and extent of the shadow economy for 31 EU countries and other European nations, including Norway, Switzerland, and Turkey. They discovered that the average size of their hidden economies was 22.6% of formal GDP in 2003, which fell to 18.6% in 2014. ...
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This paper uses the Multiple Indicators Multiple Causes (MIMIC) approach to determine the annual size and growth of the hidden economy in Jordan for the period 1980-2018. We find that the key causal variables of the hidden economy in Jordan are: female labor force participation, the inflation rate, the unemployment rate, total tax revenue, and the budget deficit. The growth of these causal variables increases Jordan's hidden economy. According to our findings, the estimated average of the hidden economy from 1980 to 2018 is 17.6% of the official GDP. Thus, it comprises a large portion of the official GDP. Furthermore, our results suggest an increase in the size of Jordan's hidden economy from 11.8% in 1980 to 22.4% in 2018. The overall results can assist policymakers in Jordan to combat and reduce the size of the hidden economy.
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The first part of the book deals with the financial and monetary aspects of European integration. The reader will find here the results of research on the integration of financial markets in the EU, the European Banking Union, the policy of the European Central Bank and the experience experiences of being in the Eurozone (Lithuania), outside it (Switzerland) as well as lessons for Poland from the experience of countries which have already made their way to the euro. The second section is entitled "Determinants of economic integration in Europe" and includes The second section is entitled "Determinants of Economic Integration in Europe" and contains studies on the history, current conditions and challenges of the European Union, as well as those of the member states. These include studies on the integration of EU investment policy, reflections on the development paradigm in the EU, analyses of German exports to the PIGS countries, as well as studies on the significance of CEFTA for the Balkan countries. This part of the book there are also articles on bilateral relations between Switzerland and the EU, and on FATCA being a pillar of international tax cooperation. The third part of the book is entitled. "EU Development Challenges. European integration in the face of crisis" brings together texts, the authors of which pose and attempt to answer important questions about the impact of the crisis on the current and future situation of the EU, as well as on the sources of development and competitiveness of the European Community. This section includes, among others, studies on the history of European integration, fiscal policy in the EU and the eurozone, the migration crisis, as well as the impact of European funds and private equity investments on economic growth. The fourth section of the book contains 11 texts which are articles prepared on the basis of theses, one from each university undertaking a postgraduate programme with the National Bank of Poland Programme of postgraduate studies "Mechanisms of functioning of the euro area" in the academic year 2015/16. The universities selected one best thesis of the 7th edition of the studies, and the research results contained in these theses are presented in the last section of this book. The texts cover a wide range of economic issues related to the EU and the euro area.
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This study examines the determinants of the shadow economy by employing Bayesian Model Averaging technique, which allows taking into account model uncertainty. Having estimated millions of combinations of models, the study revealed that while higher GDP growth rate, trade openness, and better institutional quality lead to the reduction of the informal sector, higher rate of unemployment, complicated regulations, and the large size of government are associated with a greater size of the shadow economy. Lessening bureaucratic complexity by eliminating burdensome regulations could help to reduce both wasteful spending of government on operating these regulations and the size of the underground economy.
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