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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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Friedrich Georg Schneider at Johannes Kepler University of Linz
Friedrich Georg Schneider
Friedrich Georg Schneider at Johannes Kepler University of Linz
Friedrich Georg Schneider
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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.
Page 3 of 7
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)
Page 4 of 7
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
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