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The Impact of Unemployment Rate on the Dimension of Shadow Economy in Spain: A Structural Equation Approach

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  • Ion Dobre
  • Adriana AnaMaria Alexandru

Abstract

The paper uses annual data for the period 1970-2007 in order to estimate the size of Spanish shadow economy. In view to do so, the shadow economy is modelled like a latent variable using the structural equation model(SEM). The model includes tax burden, social benefits, subsidies, government employment, self-employment and unemployment rate as main causes of shadow economy and the results indicates that the size of informal sector oscillates between 22% and 18% of GDP in the last ten years. Investigating the relationship between the shadow economy and unemployment rate a positive relationship is marked out between this two variables.

Suggested Citation

  • Ion Dobre & Adriana AnaMaria Alexandru, 2009. "The Impact of Unemployment Rate on the Dimension of Shadow Economy in Spain: A Structural Equation Approach," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 179-197.
    • Handle: RePEc:ers:journl:v:xii:y:2009:i:4:p:179-197
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    References listed on IDEAS

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    3. Feige,Edgar L. (ed.), 1989. "The Underground Economies," Cambridge Books, Cambridge University Press, number 9780521262309, November.
    4. 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.
    5. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    6. Friedrich Schneider & Kausik Chaudhuri & Sumana Chatterjee, 2003. "The Size and Development of the Indian Shadow Economy and a Comparison with other 18 Asian Countries: An Empirical Investigation," Economics working papers 2003-02, Department of Economics, Johannes Kepler University Linz, Austria.
    7. Adam, M. C. & Ginsburgh, V., 1985. "The effects of irregular markets on macroeconomic policy : Some estimates for belgium," European Economic Review, Elsevier, vol. 29(1), pages 15-33.
    8. Victor Ginsburgh & Marie Christine Adam, 1985. "The Effects of Irregular Markets on Macroeconomic Policy," ULB Institutional Repository 2013/151090, ULB -- Universite Libre de Bruxelles.
    9. El. Thalassinos & Th. Kiriazidis, 2003. "Degrees Of Integration In International Portfolio Diversification: Effective Systemic Risk," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 119-130, January -.
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    Citations

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    Cited by:

    1. Phoebe W. Ishak & Mohammad Reza Farzanegan, 2022. "Oil price shocks, protest, and the shadow economy: Is there a mitigation effect?," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 298-321, July.
    2. Paraskevi Koufopoulou & Colin C. Williams & Athanassios Vozikis & Kyriakos Souliotis & Antonios Samprakos, 2021. "Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(3-4), pages 23-47, July-Dece.
    3. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Unemployment and the Informal Economy," SpringerBriefs in Economics, Springer, number 978-3-030-96687-4, June.
    4. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Theorizing the Informal Economy," SpringerBriefs in Economics, in: Unemployment and the Informal Economy, chapter 0, pages 7-60, Springer.
    5. Phoebe W. Ishak & Ulrich Fritsche, 2019. "Oil Price Shocks and Protest: Can Shadow Economy Mitigate?," Macroeconomics and Finance Series 201901, University of Hamburg, Department of Socioeconomics.
    6. Miroslava Kostova Karaboytcheva & Carolina Silva Cassorla, 2015. "The shadow economy: a relevant factor for investment decisions in selected European Union countries," Financial Theory and Practice, Institute of Public Finance, vol. 39(3), pages 305-323.
    7. Shu-Hong Wang & Ma-Lin Song & Tao Yu, 2019. "Hidden Carbon Emissions, Industrial Clusters, and Structure Optimization in China," Computational Economics, Springer;Society for Computational Economics, vol. 54(4), pages 1319-1342, December.
    8. Sefa Karagoz, 2020. "The Importance of the Informal Economy for Social Policy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 70(2), pages 479-505, December.
    9. Felicia C. Abada & Charles O. Manasseh & Ifeoma C. Nwakoby & Ngozi Franca Iroegbu & Johnson I. Okoh & Felix C. Alio & Adedoyin I. Lawal & Onyinye J. Asogwa, 2021. "Relationship Between Unemployment Rate and Shadow Economy in Nigeria: A Tado-Yamamoto Approach," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 271-283, May.

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    More about this item

    Keywords

    Shadow economy; MIMIC mode; unemployment rate;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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

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