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The Shadow Economy in Colombia: Size and Effects on Economic Growth

Author

Listed:
  • Schneider Friedrich

    (Department of Economics, Johannes Kepler University Linz, Altenberger Straße 69, A-4040 Linz/Austria)

  • Hametner Bettina

    (Economist, Austria)

Abstract

Using the currency demand approach, size and development of Colombia’s shadow economy are estimated over the period from 1980 to 2012. The results show a great extent of shadow economic activity varying over time between 27 and 56% of GDP. The most important factors driving the shadow economy are indirect taxation and unemployment. Analyzing the interaction between shadow and official economy, the shadow economy has a negative effect on the official one. Average growth of real per capita GDP is 1.86% between 1980 and 2012, without shadow economy it would have been higher around 0.12 percentage points on average.

Suggested Citation

  • Schneider Friedrich & Hametner Bettina, 2014. "The Shadow Economy in Colombia: Size and Effects on Economic Growth," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(2), pages 293-325, April.
    • Handle: RePEc:bpj:pepspp:v:20:y:2014:i:2:p:33:n:3
    DOI: 10.1515/peps-2013-0059
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    References listed on IDEAS

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    1. Friedrich Schneider & Friedrich Schneider, 2008. "Shadow Economies and Corruption all over the World: What do we Really Know?," Chapters, in: Michael Pickhardt & Edward Shinnick (ed.), The Shadow Economy, Corruption and Governance, chapter 7, pages 122-187, Edward Elgar Publishing.
    2. Hildegart Ahumada & Facundo Alvaredo & Alfredo Canavese, 2007. "The Monetary Method And The Size Of The Shadow Economy: A Critical Assessment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(2), pages 363-371, June.
    3. Arne Jon Isachsen & Steiner Strøm, 1985. "The Size And Growth Of The Hidden Economy In Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(1), pages 21-38, March.
    4. Ben-Zion Zilberfarb, 1986. "Estimates of the Underground Economy in the United States, 1930-80: A Comment on Tanzi," IMF Staff Papers, Palgrave Macmillan, vol. 33(4), pages 790-798, December.
    5. Feige,Edgar L. (ed.), 1989. "The Underground Economies," Cambridge Books, Cambridge University Press, number 9780521262309, January.
    6. Susan Pozo (ed.), 1996. "Exploring the Underground Economy," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number eue.
    7. 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.
    8. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 262-303.
    9. Guerino Ardizzi & Carmelo Petraglia & Massimiliano Piacenza & Gilberto Turati, 2014. "Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, With an Application to Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 747-772, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Colombian shadow economy; currency demand method; taxation; unemployment; interaction between the shadow and official economy;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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