Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation

Randall Filer, Jan Hanousek and Tomáš Lichard

No 10483, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop an estimator of unreported income that relies on much more flexible identifying assumptions than those underlying previous estimators of the shadow economy using household-level data. Assuming only that evading households have a higher consumption-income gap than non-evaders in surveys, an endogenous switching model with unknown sample separation enables the estimation of both the probability of hiding income and the expected amount of unreported income for each household. Using data from Czech and Slovak household budget surveys, we find the size of the shadow economy to be substantially larger than estimated using other techniques. These results are robust under a number of alternative specifications.

Keywords: Consumption-income gap; Tax evasion; Underreporting (search for similar items in EconPapers)
JEL-codes: H26 J46 O17 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-iue, nep-ltv and nep-tra
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP10483 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation (2013)
Working Paper: Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation (2012)
Working Paper: Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10483

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10483

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().