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Does the shadow economy raise observed aggregate efficiency? A cross-country comparison

Author

Listed:
  • Pierre-Guillaume Méon
  • Axel Dreher
  • Friedrich Schneider
  • Laurent Weill

Abstract

We analyze how adding the shadow economy to official output figures affects technical efficiency. We find that this only slightly affects the ranking of efficiency scores, but increases average efficiency. Our results are robust to the functional form of the production technology and the adjustment of labor to account for years of schooling.
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Suggested Citation

  • Pierre-Guillaume Méon & Axel Dreher & Friedrich Schneider & Laurent Weill, "undated". "Does the shadow economy raise observed aggregate efficiency? A cross-country comparison," ULB Institutional Repository 2013/8406, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/8406
    as

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    References listed on IDEAS

    as
    1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    2. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    3. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 5266, London School of Economics and Political Science, LSE Library.
    4. Kneller, Richard & Andrew Stevens, Philip, 2003. "The specification of the aggregate production function in the presence of inefficiency," Economics Letters, Elsevier, vol. 81(2), pages 223-226, November.
    5. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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