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Mapping the Informal Economy Around the World with an Enhanced MIMIC Approach: New Estimates for 110 Countries from 1997-2022

Author

Listed:
  • Alban Asllani
  • Roberto Dell'Anno
  • Friedrich Schneider

Abstract

Using an enhanced MIMIC method, this paper presents new estimates of the Informal Economy (IE) for 110 countries from 1997 to 2022. We address several limitations found in previous estimates of the IE, notably issues surrounding the missing values, time-invariant country characteristics, and calibration issues with exogenous variables. We enhance the MIMIC model by including fixed effects for country-specific characteristics of IE, thereby providing more reliable estimates. Our findings show a significant variation in the key drivers of IE between high-income and not-high-income countries, exhibiting distinct causal effects on the IE depending on different economic developments. In terms of normative implications, our results highlight the need for specific and tailored policies in dealing with the formalisation of informal activities in countries with different levels of income.

Suggested Citation

  • Alban Asllani & Roberto Dell'Anno & Friedrich Schneider, 2024. "Mapping the Informal Economy Around the World with an Enhanced MIMIC Approach: New Estimates for 110 Countries from 1997-2022," CESifo Working Paper Series 11416, CESifo.
    • Handle: RePEc:ces:ceswps:_11416
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    References listed on IDEAS

    as
    1. Guillermo Vuletin, 2008. "What is the Size of the Pie? Measuring the Informal Economy in Latin America and the Caribbean," Money Affairs, CEMLA, vol. 0(2), pages 161-191, July-Dece.
    2. Ana Cinta G. Cabral & Norman Gemmell & Nazila Alinaghi, 2021. "Are survey-based self-employment income underreporting estimates biased? New evidence from matched register and survey data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 284-322, April.
    3. Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 2008/102, International Monetary Fund.
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    More about this item

    Keywords

    informal economy; shadow economy; structural equation modelling; MIMIC approach;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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