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Measuring the Informal Economy in the Caucasus and Central Asia

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  • Mr. Yasser Abdih
  • Leandro Medina

Abstract

This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

Suggested Citation

  • Mr. Yasser Abdih & Leandro Medina, 2013. "Measuring the Informal Economy in the Caucasus and Central Asia," IMF Working Papers 2013/137, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/137
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    References listed on IDEAS

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    1. Feldmann, Horst, 2009. "The unemployment effects of labor regulation around the world," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 76-90, March.
    2. Roberta Gatti & Diego F. Angel-Urdinola & Joana Silva & Andras Bodor, 2011. "Striving for Better Jobs : The Challenge of Informality in the Middle East and North Africa Region," World Bank Publications - Reports 10857, The World Bank Group.
    3. 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.
    4. Guillermo Javier Vuletin, 2008. "Measuring the Informal Economy in Latin America and the Caribbean," IMF Working Papers 2008/102, International Monetary Fund.
    5. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
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    Cited by:

    1. Leandro Medina & Friedrich Schneider, 2017. "Shadow Economies around the World: New Results for 158 Countries over 1991-2015," CESifo Working Paper Series 6430, CESifo.
    2. Lord, Montague, 2015. "Regional Economic Integration in Central Asia and South Asia," MPRA Paper 66436, University Library of Munich, Germany.
    3. International Monetary Fund, 2016. "Kyrgyz Republic: Selected Issues," IMF Staff Country Reports 2016/056, International Monetary Fund.
    4. Binhan Elif, Yilmaz, 2018. "Remittances, and Human Development in Central Asia," MPRA Paper 106580, University Library of Munich, Germany, revised 2018.
    5. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Unemployment and the Informal Economy," SpringerBriefs in Economics, Springer, number 978-3-030-96687-4, June.
    6. Sarsen Zhanabekov, 2022. "Robust determinants of the shadow economy," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 1017-1052, October.
    7. Mr. Ben Kelmanson & Koralai Kirabaeva & Leandro Medina & Borislava Mircheva & Jason Weiss, 2019. "Explaining the Shadow Economy in Europe: Size, Causes and Policy Options," IMF Working Papers 2019/278, International Monetary Fund.
    8. Alexandru Cojocaru, 2017. "Kosovo Jobs Diagnostic," World Bank Publications - Reports 27173, The World Bank Group.
    9. Roberta Gatti & Diego F. Angel-Urdinola & Joana Silva & Andras Bodor, 2014. "Striving for Better Jobs : The Challenge of Informality in the Middle East and North Africa," World Bank Publications - Books, The World Bank Group, number 19905.
    10. DUCU, Matei Adrian, 2018. "Reducing Tax Evasion By Introducing Control Guides In Romania," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 6(1), pages 48-54, October.
    11. Mirzobobo Yormirzoev, 2022. "Economic Growth and Productivity Performance in Central Asia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(3), pages 520-539, September.
    12. Leandro Medina & Friedrich Schneider, 2019. "Shedding Light on the Shadow Economy: A Global Database and the Interaction with the Official One," CESifo Working Paper Series 7981, CESifo.
    13. Bożena, Chrząstowska, 2019. "Labour Migration and Remittances in Eurasia," MPRA Paper 106628, University Library of Munich, Germany, revised 2019.
    14. 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.
    15. Friedrich Schneider, 2022. "New COVID-related results for estimating the shadow economy in the global economy in 2021 and 2022," International Economics and Economic Policy, Springer, vol. 19(2), pages 299-313, May.

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