Economics serving society

L’évaluation de la taille de l’économie informelle par un système complet de demande estimé sur données monétaires et temporelles

Armagan T. Aktuna Gunes, François Gardes and Christophe Starzec

It is generally considered that informal economic activities are explained by the double motives of avoiding tax and improving living standards. Identifying black markets and how they work, a crucial goal for public authorities, is made difficult by the lack of reliable and accurate statistics. The most frequently used methods for assessing the size of the informal economy are based on macro-economic approaches including studies of the demand for money, tax collection, use of electricity use and other factors of production (1). Thus, the assessments are disparate and do not facilitate the development of appropriate public policy.
In this article, Gunes, Gardes and Starzec study these different modes, and take Turkey as a specific case. Recent comparable estimations of the size of its informal economy vary depending on the methods used, ranging from 3.6 per cent to 130 per cent of the formal economy. Moreover, the hypotheses underpinning these macroeconomic estimations are heavily criticised for their lack of theoretical foundation, which makes the rare studies founded on microeconomic approaches more interesting still. Here, the authors use two microeconomic methods, the first of which is based on direct investigations of the Polish population (2), while the second aims to reveal the revenue deficit shown in the level of household expenditure in Turkey (3). The use of data integrating monetary expenditures and time spent on each activity allows an accurate estimation of the system of consumption functions (4).
As might be expected, when estimated using complete expenditures (both time and money), the size of the Turkish informal economy is higher than when using approaches based only on monetary expenditures: 40.6 per cent and 33.5 per cent of GDP respectively for the self-employed; and 20.7 per cent and 14.1 per cent for employees. Furthermore, this estimation is also higher than those obtained by more conventional macroeconomic methods (by an average of 35 per cent). The significance of the informal economy in Turkey has sensitive consequences in terms of distribution: in this model, the incorporation of the revenues created by informal activities reduce the indicators of poverty and inequality by around one-third.
(1) For example, the light revealed by satellites images and by dynamic macroeconomic modelling.
(2) Gardes, F ., Starzec, C., 2009, Polish Households’ Behavior in the Regular and Informal Economies, Revue Economique, Sept.
(3) Data obtained by the pairing of an enquiry into family budgets and time budgets.
(4) Pissarides, C., Weber, G., 1989, An Expenditure-Based Estimate of Britain’s Black Economy, Journal of Public Economics, 39, p. 17-32.

Original title of the article : “L’évaluation de la taille de l’économie informelle par un système complet de demande estimé sur données monétaires et temporelles”
Published in: Revue économique 2014
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