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Estimating shadow economy in Tanzania: an analysis with the MIMIC approach

Author

Listed:
  • Roberto Dell’Anno
  • Adriana AnaMaria Davidescu
  • Nguling’wa Philip Balele

Abstract

Purpose - The purpose of this paper is to estimate the Tanzanian shadow economy (SE) from 2003 to 2015 and test the statistical relationships between the SE and its potential causes and indicators. Design/methodology/approach - The econometric analysis is based on a multiple indicators multiple causes (MIMIC) model. To calibrate the SE from the estimates, the authors adopt the value of 55.4 percentage of the SE to official GDP from the literature for the base year 2005. Findings - The SE ranges from 52 to 61 per cent of official GDP and slightly decreases from 2013 to 2015. Increase in inflation, unemployment and government spending were the main drivers of the SE dynamics. Research limitations/implications - Given the challenges facing estimation of the SE (e.g. small sample size, exogenous estimate to calibrate the model, meaning of the latent variable), quantification of SE should be considered to be rough measures. Practical implications - To lower the size of the SE, the government needs to keep inflation and unemployment stable over time, to reduce government spending because it creates pressure on tax collection due to the limited tax base. Originality/value - This is the first study specifically focused on Tanzanian SE based on the MIMIC approach. Existing estimates of Tanzanian SE are calculated by monetary models or apply a common MIMIC specification to the worldwide context.

Suggested Citation

  • Roberto Dell’Anno & Adriana AnaMaria Davidescu & Nguling’wa Philip Balele, 2018. "Estimating shadow economy in Tanzania: an analysis with the MIMIC approach," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(1), pages 100-113, January.
    • Handle: RePEc:eme:jespps:jes-11-2016-0240
    DOI: 10.1108/JES-11-2016-0240
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    Citations

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    Cited by:

    1. Canh Phuc Nguyen & Binh Nguyen Quang & Thanh Dinh Su, 2023. "Institutional frameworks and the shadow economy: new evidence of colonial history, socialist history, religion, and legal systems," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(3), pages 647-675, September.
    2. Mubarack H. Kirumirah & Emmanuel J. Munishi & Anna E. Kajubili, 2023. "The Conundrum in Accessing Business Development Services among Urban Informal Manufacturers in Dar es Salaam, Tanzania," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(12), pages 119-119, February.
    3. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.
    4. Ahmad, Waqar & Hussain, Babar, 2023. "Fiscal Policy Effects on Shadow Economy: Empirical Evidence from Developing Countries," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 30(2), July.
    5. Emmanuel Umoru Haruna & Usman Alhassan, 2022. "Does digitalization limit the proliferation of the shadow economy in African countries? An in‐depth panel analysis," African Development Review, African Development Bank, vol. 34(S1), pages 34-62, July.
    6. Mohammed Nayel Abu Alfoul & Ibrahim Naser Khatatbeh & Fouad Jamaani, 2022. "What Determines the Shadow Economy? An Extreme Bounds Analysis," Sustainability, MDPI, vol. 14(10), pages 1-22, May.
    7. Anthelme A N'Dri, 2021. "Informal Economy In Sub-Saharan Africa : Main Drivers And Estimation Of His Size From Ivory Coast [Economie informelle en afrique subsaharienne : déterminants et estimation en Côte d'Ivoire]," Working Papers halshs-03211696, HAL.
    8. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2023. "An estimation of the informal economy in the agricultural sector in the EU‐15 from 1996 to 2019," Agribusiness, John Wiley & Sons, Ltd., vol. 39(2), pages 406-447, March.
    9. Stephen Esaku, 2022. "Institutionalized democracy and the shadow economy in the short- and long-run: empirical analysis from Uganda," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    10. Narciz Balasoiu & Iulian Chifu & Marian Oancea, 2023. "Impact of Direct Taxation on Economic Growth: Empirical Evidence Based on Panel Data Regression Analysis at the Level of Eu Countries," Sustainability, MDPI, vol. 15(9), pages 1-32, April.
    11. Musa Abdullahi Sakanko & Joseph David & Nurudeen Abu & Awadh Ahmed Mohammed Gamal, 2024. "Financial inclusion and underground economy nexus in West Africa: evidence from dynamic heterogeneous panel techniques," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-20, February.
    12. Bennihi, Aymen Salah & Bouriche, Lahcene & Schneider, Friedrich, 2021. "The informal economy in Algeria: New insights using the MIMIC approach and the interaction with the formal economy," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 470-491.
    13. Nasibu Mramba, 2022. "Moving towards the social inclusion for street vendors in Tanzania: Current situation and perspectives," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(2), pages 296-305, March.

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