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New estimate of shadow economy based on the total energy consumption. Evidence from the European Union countries

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  • Achim, Monica Violeta
  • Postea, Mihaela Maria
  • Noja, Gratiela Georgiana

Abstract

Estimating the shadow economy has become a significant concern for politicians, economists, and social scientists in recent times. Despite various advancements in methodology and empirical shreds of evidence, some areas remain unexplored. This article provides a valuable database on the estimations of the shadow economy in 26 EU countries for the period 2001–2021. We develop an innovative technique for measuring the shadow economy that is distinct from previous methods in the literature since it relies upon a modified version of the physical input approach. Instead of relying solely on electric power consumption, we consider the total final energy consumption, which encompasses all forms of energy utilized in the economy. In addition, advanced econometric modeling is performed through robust fixed effects LSDV model to delve into the credentials of our method. The main findings reveal significant variation in average levels of the shadow economy in the European Union, which range between 9.5% and 40% of the official GDP over the analyzed period. The developed database is intended to serve as a valuable resource for policymakers as they strive to combat economic crime. Its widespread utilization is anticipated, as a tool that will play an integral role in informing the development of effective policies and strategies in this critical area.

Suggested Citation

  • Achim, Monica Violeta & Postea, Mihaela Maria & Noja, Gratiela Georgiana, 2024. "New estimate of shadow economy based on the total energy consumption. Evidence from the European Union countries," Energy Economics, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:eneeco:v:130:y:2024:i:c:s0140988324000434
    DOI: 10.1016/j.eneco.2024.107335
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    More about this item

    Keywords

    Total energy consumption; Shadow economy; European Union; Robust fixed effects LSDV model;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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