Hidden in plain sight: using household data to measure the shadow economy

0542076 - NHÚ 2022 RIV DE eng J - Journal Article
Lichard, Tomáš - Hanousek, Jan - Filer, R. K.
Hidden in plain sight: using household data to measure the shadow economy.
Empirical Economics. Roč. 60, č. 3 (2021), s. 1449-1476. ISSN 0377-7332. E-ISSN 1435-8921
Institutional support: RVO:67985998
Keywords : tax evasion * income underreporting * consumption–income gap
OECD category: Applied Economics, Econometrics
Impact factor: 2.647, year: 2021
Method of publishing: Limited access
https://doi.org/10.1007/s00181-019-01797-z

We develop an estimator of unreported income that relies on more flexible identifying assumptions than those that have been used previously. Assuming only that evaders have a higher consumption–income gap than non-evaders in surveys, our model enables the estimation of both the probability of hiding income and the amount of unreported income for each household. We illustrate the method using Czech and Slovak household budget surveys. Our results are robust to alternative specifications. Furthermore, we show that since the underreported share decreases with reported income, income inequality in these countries may be lower than suggested by the reported income.
Permanent Link: http://hdl.handle.net/11104/0319567