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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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    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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