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Comment on Measuring the Size of the Shadow Economy Using a Dynamic General Equilibrium Model with Trends

Author

Listed:
  • Manuel A. Gómez
  • Adrián Ríos-Blanco

Abstract

In their 2018 Journal of Macroeconomics article “Measuring the Size of the Shadow Economy Using a Dynamic General Equilibrium Model with Trends,” Mario Solis-Garcia and Yingtong Xie propose a method for measuring the size and dynamics of the shadow economy. We show that the method does not serve its purpose because once correctly implemented it generates a constant ratio of shadow to formal production, which is equal to a base-year estimate taken from an external source.

Suggested Citation

  • Manuel A. Gómez & Adrián Ríos-Blanco, 2022. "Comment on Measuring the Size of the Shadow Economy Using a Dynamic General Equilibrium Model with Trends," Econ Journal Watch, Econ Journal Watch, vol. 19(1), pages 124–132-1, March.
    • Handle: RePEc:ejw:journl:v:19:y:2022:i:1:p:124-132
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    More about this item

    Keywords

    Shadow economy; dynamic general equilibrium models;

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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