The Economics of the Shadow Economy

Robbery, larceny, blackmail, fraud, and other crimes with economic motives are likely to be as old as mankind, and the evasion of taxes and economic regulations can be assumed to begin with the introduction of taxes and economic regulations. Thus the shadow economy is certain ly not a new phenomenon. However, economists did not pay much attention to it until quite recently. P. GUTMANN in his pioneering article "The Subterranean Economy" (Financial Analysts Journal, Nov/Dec 1977, p. 24- 27) was first to point out that unreported economic activity cannot (or, at least, can no longer) be considered as a "quantite negligeable". Challenged by GUTMANN's hypothesis many economists have then tried to assess the quantitative and qualitative importance of the shadow economy (commonly also known as the underground, or subterranean, or black, or unreported economy, and by other names). There seems to be wide agreement nowadays that the shadow economy has not only reached a substantial portion of total economic activity in both Eastern and Western countries but that it is also growing at rates which can no longer be experienced in the official sector. The existence of a considerable volume of unreported economic activities implies that important macroeconomic variables are biased in the official statistics. The rate of unemployment, for example, may be over-estimated while production figures, on the other hand, tend to be underrated. The government could thus be mislead and choose inadequate policies.

Contenu
1: Conceptual Questions.- The Subterranean Economy, Redux.- The Meaning of the 'Underground Economy' and the Full Compliance Deficit.- Subterranean Labor Markets: A Conceptual Analysis.- Crime: What Should be Recorded in the National Accounts, and What Difference Would it Make?.- 2: Empirical Evidence.- The Parallel Economy in Austria.- Measuring the Shadow Economy: The Case of Switzerland.- The Unobserved Economy and the National Accounts in the Netherlands A Sensitivity Analysis.- The Relationship Between the Formal and Hidden Economies: An Exploratory Analysis for Four Countries.- Belgium's Irregular Economy.- Market Motives in the Informal Economy.- 3: Theoretical Approaches.- Macroeconomic Policy and the Shadow Economy.- Macroeconomic Policy in the Presence of an Irregular Sector.- A Microeconomic Analysis of Black Labour Demand and Supply.- The Behavior of Tax Evaders.- Optimal Tax Evasion & Optimal Tax Evasion Policy: Behavioral Aspects.- The Shadow Economy and Morals: A Note.- 4: Policy Implications.- Public Policy and Tax Evasion: Some Problems.- Tax Evasion and Government Policy.- Is a Growing Unobserved Sector Undermining Monetary Policy in the Federal Republic of Germany?.- 5: Household Production.- The Disappearance of Domestic Servants and the Underground Economy.- Household Composition, Social Networks and Household Production.- 6: Eastern Countries.- Peculiarities and Limits of the Second Economy in Socialism (The Hungarian Case).- The Second Economy in the Soviet Union and its Implications for Economic Policy.- Repressed Inflation and Second Economy Under Central Planning with an appendix MaximumPrinciple for Speculative Money Balances by Andrzej ZIEBA.- Author Index.