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A New Multidimensional Ranking of Shadow Economy for EU Countries

Author

Listed:
  • Gheorghe ZAMAN

    (Institute of National Economy, Bucharest, Romania)

  • Zizi GOSCHIN

    (Bucharest Academy of Economic Studies & Institute of National Economy, Bucharest, Romania)

Abstract

Shadow economy is a perennial, multifaceted and hard to gauge phenomenon that affects to some degree all countries. Scientific research needs to develop rigorous and internationally comparable metrics of shadow economy in order to avoid possible misunderstanding, exaggeration and sometimes bad intentions concerning the assessment of shadow economy, corruption and fiscal fraud. Considering the limitations of single shadow economy indicators we propose a more comprehensive measurement based on a new synthetic shadow economy index (SSEI). This index encompasses three relevant indicators, namely the size of shadow economy per capita, the shadow economy relative to GDP and the countries’ shares in EU total shadow economy. The analysis covered the period 1999 to 2012 and the results indicated that some of the developed EU countries, rather than the new members, are on top positions of the shadow economy. We also found a sigma convergence trend in shadow economy size and intensity among EU-28 countries over 1999-2012. The main conclusion of our paper is that the analyses of shadow economy should be based on a set of relevant indicators, instead of a single indicator.

Suggested Citation

  • Gheorghe ZAMAN & Zizi GOSCHIN, 2016. "A New Multidimensional Ranking of Shadow Economy for EU Countries," Romanian Journal of Economics, Institute of National Economy, vol. 43(2(52)), pages 14-33, december.
    • Handle: RePEc:ine:journl:v:43:y:2016:i:52:p:14-33
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    References listed on IDEAS

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    More about this item

    Keywords

    shadow economy metrics; synthetic index; EU.;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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