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A Note on Measuring the Unofficial Economy in the Former Soviet Republics

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  • Michael Alexeev
  • William Pyle

Abstract

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet Republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.

Suggested Citation

  • Michael Alexeev & William Pyle, 2002. "A Note on Measuring the Unofficial Economy in the Former Soviet Republics," Middlebury College Working Paper Series 0230, Middlebury College, Department of Economics.
    • Handle: RePEc:mdl:mdlpap:0230
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    References listed on IDEAS

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    1. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    2. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
    3. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    4. 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.
    5. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
    6. Rosser, J. Jr. & Rosser, Marina V. & Ahmed, Ehsan, 2000. "Income Inequality and the Informal Economy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 156-171, March.
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    Cited by:

    1. Friedrich Schneider & Christina Burger, 2005. "Formal and Informal Labour Markets: Challenges and Policy in the Central and Eastern European New EU Members and Candidate Countries," CESifo Economic Studies, CESifo Group, vol. 51(1), pages 77-115.
    2. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2007. "Public sector pay and corruption: Measuring bribery from micro data," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 963-991, June.
    3. Edgar L. Feige & Ivica Urban, 2003. "Estimating the Size and Growth of Unrecorded Economic Activity in Transition Countries: A Re-evaluation of Electric Consumption Method Estimates and their Implications," Macroeconomics 0311010, University Library of Munich, Germany.
    4. Ageeva Svetlana & Suslov Nikita, 2005. "Energy Consumption and GDP in Market and Transitional Economies," EERC Working Paper Series 05-05e, EERC Research Network, Russia and CIS.
    5. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    6. Friedrich Schneider & Friedrich Schneider, 2008. "Shadow Economies and Corruption all over the World: What do we Really Know?," Chapters, in: Michael Pickhardt & Edward Shinnick (ed.), The Shadow Economy, Corruption and Governance, chapter 7, pages 122-187, Edward Elgar Publishing.
    7. 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.
    8. Smirnova, Natalia, 2003. "Job search behavior of unemployed in Russia," BOFIT Discussion Papers 13/2003, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. Feige, Edgar L. & Urban, Ivica, 2008. "Measuring underground (unobserved, non-observed, unrecorded) economies in transition countries: Can we trust GDP?," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 287-306, June.
    10. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
    11. Yelena Kalyuzhnova & Michael Kaser, 2006. "Prudential Management of Hydrocarbon Revenues in Resource-rich Transition Economies," Post-Communist Economies, Taylor & Francis Journals, vol. 18(2), pages 167-187.
    12. Natalia Smirnova, 2003. "Job Search Behavior of Unemployed in Russia," William Davidson Institute Working Papers Series 2003-629, William Davidson Institute at the University of Michigan.
    13. Ercolani, Marco G., 2007. "Hidden Economies and the Socially Optimal Fiscal-Tax to Liquidity-Tax Ratio," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-32.
    14. Катышев П.К. & Полтерович В.М., 2006. "Политика Реформ, Начальные Условия И Трансформационный Спад," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 42(4), октябрь.
    15. repec:zbw:bofitp:2003_013 is not listed on IDEAS
    16. Natalia Smirnova, 2003. "Job Search Behavior of Unemployed in Russia," William Davidson Institute Working Papers Series 2003-629, William Davidson Institute at the University of Michigan.
    17. Schneider, Friedrich G. & Buehn, Andreas, 2009. "Shadow economies and corruption all over the world: revised estimates for 120 countries," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-53.
    18. Suslov, N. & Mel'tenisova, E., 2015. "Analysis of Energy Price's Impact on Shadow Economies Around the World," Journal of the New Economic Association, New Economic Association, vol. 27(3), pages 12-43.
    19. Peter, Klara Sabirianova, 2009. "Income Tax Flattening: Does It Help to Reduce the Shadow Economy?," IZA Discussion Papers 4223, Institute of Labor Economics (IZA).
    20. Joel Slemrod & Caroline Weber, 2012. "Evidence of the invisible: toward a credibility revolution in the empirical analysis of tax evasion and the informal economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 25-53, February.
    21. Byung-Yeon Kim, 2011. "The Unofficial Economy in Russia," KIER Working Papers 797, Kyoto University, Institute of Economic Research.
    22. Elina BENEA-POPUSOI, 2015. "From Rational To Spiritual In The Economic Thought," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 16, pages 157-165, December.
    23. Friedrich Schneider, 2005. "Shadow Economies of 145 Countries all over the World: What Do We Really Know?," CREMA Working Paper Series 2005-13, Center for Research in Economics, Management and the Arts (CREMA).
    24. Verme, Paolo, 2006. "Constraints to growth and job creation in low-income Commonwealth of Independent States countries," Policy Research Working Paper Series 3893, The World Bank.
    25. Schneider, Friedrich, 2004. "The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003," IZA Discussion Papers 1431, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    hidden economy; transition economies;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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