The Shadow Economy: Estimates For Malaysia

From an article on VoxEU last week:

Shadow economies all around the world: Model-based estimates
Ceyhun Elgin & Oguz Oztunali

Even though informality is a widespread phenomenon and poses serious social, economic, cultural, and political challenges across the world, many issues about its nature and consequences still remain largely under-explored or unresolved. For example, the evidence presented in the existing literature has failed to generate a consensus among researchers around the measurement of the informal sector…

Working In The Shadows II

In my recent post on GST, one commentator suggested that it would be a fairer tax simply because it would bring in all those who aren’t part of the “official” economy, the so-called shadow economy. I didn’t realise at the time just how perceptive this comment was – at least in terms of the potential impact.

For looking back, I’d actually made the same point in a post about half a year ago, based on a recent Policy Research Working Paper from the World Bank. I’ve been blogging so much, I can’t keep track of half the posts I’ve made:

Working In The Shadows

There’s a new Policy Research Working Paper from the World Bank, estimating the size of the shadow economy in a large sample of 162 countries:

Shadow economies all over the world : new estimates for 162 countries from 1999 to 2007 - Schneider, F., and Buehn, A. & Montenegro, C. E.

This paper presents estimations of the shadow economies for 162 countries, including developing Eastern European, Central Asian, and high-income countries over the period 1999 to 2006/2007. According to the estimations, the average size of the shadow economy (as a percentage of "official" gross domestic product) in 2006 in 98 developing countries is 38.7 percent; in 21 Eastern European and Central Asian (mostly transition) countries, it is 38.1 percent, and in 25 high-income countries, it is 18.7 percent. The authors find that the driving forces of the shadow economy are an increased burden of taxation (both direct and indirect), combined with labor market regulations and the quality of public goods and services, as well as the state of the "official" economy.