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Direct Estimation of Hidden Earnings: Evidence from Russian Administrative Data

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  • Serguey Braguinsky
  • Sergey Mityakov
  • Andrey Liscovich

Abstract

We employ unique administrative data from Moscow to obtain a direct estimate of hidden incomes. Our approach is based on comparing employer-reported earnings to market values of cars owned by the corresponding individuals and their households. We detect few hidden earnings in most foreign-owned firms and larger firms, especially state-owned enterprises in heavily regulated industries. The same empirical strategy indicates that up to 80 percent of earnings of car owners in the private sector are hidden, especially in smaller companies and industries such as trade and services, where cash flows are easier to manipulate. We also find considerable hidden earnings in government services. Our approach sheds new light on the decline in the gross domestic product (GDP) in Russia after the collapse of communism and subsequent recovery; in particular, we argue that a good deal of these changes might represent changes in income reporting rather than actual changes in GDP.

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  • Serguey Braguinsky & Sergey Mityakov & Andrey Liscovich, 2014. "Direct Estimation of Hidden Earnings: Evidence from Russian Administrative Data," Journal of Law and Economics, University of Chicago Press, vol. 57(2), pages 281-319.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/675943
    DOI: 10.1086/675943
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    Cited by:

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    2. Belev, Sergei & Vekerle, Konstantin & Evdokimova, Anastasiia, 2021. "The difference in tax evasion amount among various taxpayers’ groups in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 62, pages 66-84.
    3. Gavoille, Nicolas & Zasova, Anna, 2021. "Foreign ownership and labor tax evasion: Evidence from Latvia," Economics Letters, Elsevier, vol. 207(C).
    4. Ocieszak Marcin, 2020. "Determinants of Companies’ Financial Performance Following M&A Transactions in Poland," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 28(4), pages 51-66, December.
    5. Nikolaos Artavanis & Adair Morse & Margarita Tsoutsoura, 2015. "Tax Evasion across Industries: Soft Credit Evidence from Greece," NBER Working Papers 21552, National Bureau of Economic Research, Inc.
    6. Braguinsky, Serguey & Mityakov, Sergey, 2015. "Foreign corporations and the culture of transparency: Evidence from Russian administrative data," Journal of Financial Economics, Elsevier, vol. 117(1), pages 139-164.
    7. Ying Hao & Danni Han & Chong Ning & Jianhui Liao, 2021. "Culture from overseas and corporate transparency: Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2491-2516, April.
    8. Raymond Fisman & Florian Schulz & Vikrant Vig, 2014. "The Private Returns to Public Office," Journal of Political Economy, University of Chicago Press, vol. 122(4), pages 806-862.
    9. Gavoille, Nicolas & Zasova, Anna, 2023. "What we pay in the shadows: Labor tax evasion, minimum wage hike and employment," Journal of Public Economics, Elsevier, vol. 228(C).
    10. Per Engström & Johannes Hagen & Edvard Johansson, 2023. "Estimating tax noncompliance among the self-employed—evidence from pleasure boat registers," Small Business Economics, Springer, vol. 61(4), pages 1747-1771, December.
    11. Todd Kumler & Eric Verhoogen & Judith Frías, 2020. "Enlisting Employees in Improving Payroll Tax Compliance: Evidence from Mexico," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 881-896, December.
    12. Lichard, Tomáš & Hanousek, Jan & Filer, Randall K., 2012. "Measuring the Shadow Economy: Endogenous Switching Regression with Unobserved Separation," IZA Discussion Papers 6901, Institute of Labor Economics (IZA).
    13. David Szakonyi, 2020. "Indecent Disclosures: Anti-Corruption Reforms and Political Selection," Working Papers 2020-21, The George Washington University, Institute for International Economic Policy.
    14. Anna Kireenko & Yuriy Ivanov & Ekaterina Nevzorova & Olga Polyakova, 2017. "Shadow Economy in the Regions of the Russian Federation and the Ukraine," Springer Proceedings in Business and Economics, in: David Procházka (ed.), New Trends in Finance and Accounting, chapter 0, pages 301-312, Springer.
    15. Tom Eeckhout & Timur Natkhov & Leonid Polishchuk & Koen Schoors & Kevin Hoefman, 2021. "Statistical footprints of corruption:“Vanity Fair” of automobile license plates in Russia," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 21/1034, Ghent University, Faculty of Economics and Business Administration.
    16. Lucy Chernykh & Sergey Mityakov, 2022. "Behavior of Corporate Depositors During a Bank Panic," Management Science, INFORMS, vol. 68(12), pages 9129-9151, December.
    17. Chernykh, Lucy & Mityakov, Sergey, 2017. "Offshore schemes and tax evasion: The role of banks," Journal of Financial Economics, Elsevier, vol. 126(3), pages 516-542.
    18. Byung-Yeon Kim, 2011. "The Unofficial Economy in Russia," KIER Working Papers 797, Kyoto University, Institute of Economic Research.
    19. Per Engström & Johannes Hagen & Edvard Johansson, 2021. "Estimating Tax Noncompliance among the Self-Employed – Evidence from Pleasure Boat Registers," Discussion Papers 144, Aboa Centre for Economics.
    20. Tomáš Lichard & Jan Hanousek & Randall K. Filer, 2021. "Hidden in plain sight: using household data to measure the shadow economy," Empirical Economics, Springer, vol. 60(3), pages 1449-1476, March.

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