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Size And Implication Of Underground Economy In Romania - A Mimic Approach

Author

Listed:
  • Corina - Maria Ene
  • Andrei Åžtefănescu

Abstract

Since the economic crisis affected the real economy in Romania, the official GDP declined by almost 5 percent in 2009 compared with 2008, 1.3 percent in 2010 against the previous year and unemployment increased too. In 2011 a moderate growth of the GDP is expected but unemployment will further increase. Against this background the extent of the underground economy in Romania and its development over time are once again the subject of intense debate, as many people will attempt to make up for loss of income in the official economy through greater participation in the underground economy. The objective of this paper is to estimate the size of the underground economy in Romania by using the Multiple Indicators Multiple Causes (MIMIC) method. The MIMIC approach is based on the idea that the underground economy is not a directly observable measure, but it is possible to approximate it using quantitatively measurable causes of working in the underground economy and using indicators in which underground economic activities are reflected. In addition, the paper aims at clarifying to what extent the variables explain the size of the underground economy in Romania.

Suggested Citation

  • Corina - Maria Ene & Andrei Åžtefănescu, 2011. "Size And Implication Of Underground Economy In Romania - A Mimic Approach," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 1-8.
    • Handle: RePEc:alu:journl:v:1:y:2011:i:13:p:8
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    References listed on IDEAS

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    1. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
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    3. Corina-Maria Ene, 2010. "Tax Evasion Dynamics in Romania Reflected by Fiscal Inspection Activities," Romanian Journal of Economics, Institute of National Economy, vol. 30(1(39)), pages 146-158, June.
    4. Enste, Dominik & Schneider, Friedrich, 1998. "Increasing Shadow Economies all over the World - Fiction or Reality?," IZA Discussion Papers 26, Institute of Labor Economics (IZA).
    5. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, University Library of Munich, Germany, revised 15 Dec 2005.
    6. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-66.
    7. Tedds, Lindsay, 2005. "The Underground Economy in Canada," MPRA Paper 4229, University Library of Munich, Germany.
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    Cited by:

    1. Misbah Kiani & Adeel Ahmed & Khalid Zaman, 2015. "Combining qualitative and quantitative approaches for measuring underground economy of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(1), pages 295-317, January.

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    More about this item

    Keywords

    underground economy; Multiple Indicators Multiple Causes (MIMIC); latent variable; structural equation model;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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