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Article
Publication date: 18 May 2020

Menggen Chen and Shuai Zhang

The non-observed economy (NOE) is a pervasive phenomenon worldwide, especially in developing countries, but the size of the NOE and its contributions to the overall economy

Abstract

Purpose

The non-observed economy (NOE) is a pervasive phenomenon worldwide, especially in developing countries, but the size of the NOE and its contributions to the overall economy are usually unknown. This paper presents an estimation of the average size of the NOE for the 31 provincial regions in China between 1992 and 2013.

Design/methodology/approach

This study uses the Defense Meteorological Satellite Program/Operational Linescan System (DMSP/OLS) nighttime light data combined with 11 existing surveys on or measurements of NOE for 191 countries or regions throughout the world, to measure the size of the NOE.

Findings

The results show that the NOE share is unevenly distributed among China's provincial regions, with the smallest being 3.19% for Beijing and the largest being 69.71% for Ningxia. The national average is 43.11%, while the figures for the eastern region, middle region, northeastern region and western region are 39.3%, 47.6%, 44.7% and 43.6%, respectively. The NOE estimates are negatively correlated with the measured gross domestic product (GDP) and GDP per capita, which suggests that developed regions tend to have less NOE.

Originality/value

The nighttime lights are used to measure the NOE for China's provincial regions. Compared with traditional databases, one of the prominent features of nighttime lights is its objectivity, as there is little human interference; therefore, it can be used to achieve more accurate results.

Details

International Journal of Emerging Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 2 July 2018

Bogdan Mróz

The purpose of this paper is to provide an empirical insight into the functioning of the informal sector in Poland and highlight the reasons for involvement of economic…

Abstract

Purpose

The purpose of this paper is to provide an empirical insight into the functioning of the informal sector in Poland and highlight the reasons for involvement of economic agents in the new forms of the shadow economy.

Design/methodology/approach

The paper is focused on the analysis of different manifestations of unregistered economic activities in Poland. The author draws upon the latest available research findings on the subject including shadow economy estimates. Finally, the case study analysis of the tobacco industry in Poland has been used to exemplify and highlight the driving forces conducive to the expansion of the informal sector.

Findings

The informal sector’s share of the Polish economy in the years 2010-2015 was put as ranging between 12.1 per cent gross domestic product (GDP) and 14.5 per cent GDP (with the peak in 2013) by the GUS (Polish Main Statistical Office), between 19.2 per cent GDP and 21.1 per cent GDP by the IBnGR think tank (peak in 2012) and between 23.3 per cent and 25.4 per cent GDP by Professor F. Schneider.

Research limitations/implications

The case study of the tobacco industry, although well illustrates the dynamics of the shadow economy, does not provide a comprehensive picture of the Poland’s informal sector.

Practical implications

The paper provides tips and recommendations aimed at reducing the size of the shadow economy.

Social implications

Reducing the size of the informal sector could strengthen the social integrity and cohesion.

Originality/value

The paper provides insight into new areas and manifestations of the shadow economy in Poland exemplified by the case study of the tobacco industry.

Details

Journal of Money Laundering Control, vol. 21 no. 3
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 22 January 2020

Martin Grandes and Ariel Coremberg

The purpose of this paper is to demonstrate empirically that corruption causes significant and sizeable macroeconomic costs to countries in terms of economic activity and…

Abstract

Purpose

The purpose of this paper is to demonstrate empirically that corruption causes significant and sizeable macroeconomic costs to countries in terms of economic activity and economic growth. The authors modeled corruption building on the endogenous growth literature and finally estimated the baseline (bribes paid to public officials) macroeconomic cost of corruption using Argentina 2004-2015 as a case study.

Design/methodology/approach

The authors laid the foundations of a new methodology to account corruption losses using data from the national accounts and judiciary investigations within the framework of the Organisation for Economic Cooperation and Development (OECD) non-observed economy (NOE) instead of subjective indicators as in the earlier literature. They also suggested a new method to compute public expenditures overruns, including but not limited to public works.

Findings

The authors found the costs stand at a minimum accumulated rate of 8 per cent of gross domestic product (GDP) or 0.8 per cent yearly. These findings provided a corruption cost floor and were consistent with earlier research on world corruption losses estimated at 5 per cent by the World Economic Forum and with the losses estimated at between a yearly rate of 1.3 and 4 per cent and 2 per cent of GDP by Brazil and Peru’s corruption, respectively.

Research limitations/implications

The authors would need to extend the application of their new suggested methodology to further countries. They are working on this. They would need to develop the methodology in full to compute the public works overruns input to future econometric work.

Originality/value

In this paper, the authors make a threefold contribution to the literature on corruption and growth: first, they laid the foundations toward a new methodology to make an accounting of the corruption costs in terms of GDP consistent with the national accounts and executed budgets; on the one hand, and the OECD NOE framework, on the other. The authors named those corruption costs as percentage of GDP the “corruption wedge.” Second, they developed an example taking corruption events and a component of their total costs, namely, the bribes paid to public officials, taking Argentina 2004-2015 as a case study. Finally, they plugged the estimated wedge back into an endogenous growth model and calibrated the growth–corruption path simulating two economies where the total factor productivity was different, at different levels of the corruption wedge.

Details

Journal of Financial Crime, vol. 27 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

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Abstract

Details

Societal Entrepreneurship and Competitiveness
Type: Book
ISBN: 978-1-83867-471-7

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Article
Publication date: 7 October 2019

Debasish Roy

Over one and half years have passed since the demonetization of Indian economy had occurred on November 8, 2016. The drastic step was initiated by the Prime Minister…

Abstract

Purpose

Over one and half years have passed since the demonetization of Indian economy had occurred on November 8, 2016. The drastic step was initiated by the Prime Minister Narendra Modi with an intention to curb the “huge” circulation of illicit or “black” money of Indian economy by means of withdrawal of high value denominations of Rupees 500 and Rupees 1,000 from the supply of broad money (M3). This step helped to demonetize around 86 per cent value of total money supply leading to an unprecedented chaos in the economy and public life. The long delays in issuing fresh currency notes at the banks and ATMs further deteriorated the sudden economic crisis.

Design/methodology/approach

This research paper is aimed at exploring the proclaimed “efficacy” of demonetization policy as proposed by Reserve Bank of India by means of a mathematical approach and critically examines the effects of demonetization on the illicit money supply of Indian economy on the basis of macroeconomic theory.

Findings

From the mathematical model and related estimates, it may be easily deduced that the Indian policymakers deliberately hurled the masses in one of the gravest economic crises with a clear-cut intention of creating a political gimmick, when in reality, the proportion of illegitimate money supply was not even 1 per cent of total legitimate supply of money.

Originality/value

The analyses and findings related to this paper are based on mathematical modeling and logical interpretations. This paper is free of plagiarism as all the necessary sources and references are properly cited.

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Book part
Publication date: 8 October 2019

Abstract

Details

Societal Entrepreneurship and Competitiveness
Type: Book
ISBN: 978-1-83867-471-7

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Article
Publication date: 3 March 2020

Claudio Quintano and Paolo Mazzocchi

This article intends to investigate on the undeclared work (UW) by involving several features, which can be evaluated throughout a set of appropriate variables. The…

Abstract

Purpose

This article intends to investigate on the undeclared work (UW) by involving several features, which can be evaluated throughout a set of appropriate variables. The REBUS-PLS (Response Based procedure for detecting Unit Segments–Partial Least Squares) has been proposed in order to support policy decisions targeted to this heterogeneous scenario. The authors refer to Italy, due to the disparity of its territorial districts, but the conclusions can be extended to different European countries.

Design/methodology/approach

A total of 2,877,000 firms has been involved for empirical analysis. The manifest variables have been obtained by fixing both NACE codes and the NUTS2 level.

Findings

The analysis confirms that the model is suitable to evaluate the effects of the indicators connected to ‘Labour force’, ‘Tax system’, ‘Non-Profit Organizations’, and ‘Migrants’. Special prominence has been dedicated to the labour inspections' features.

Research limitations/implications

If the management designs the policy actions by using the model proposed, a critical evaluation of the implications is needed, by focusing different perspectives and several weaknesses.

Practical implications

Assuming that the Italian regions are relatively homogeneous, results reveal no significant correlations to the UW, except for the taxes. In contrast, the involvement of the heterogeneity shows that the UW significantly depends on the changes of Labour force, Tax system and NPOs dimensions, in 11 out of 18 Italian regions. No clear evidence emerges from Migrants feature, which seems to have a negatively impact on the UW.

Originality/value

To the authors' knowledge, compared to the previous research papers, the analysis of the UW via REBUS-PLS and the mentioned manifest variables, has never been undertaken so far.

Details

Journal of Economic Studies, vol. 47 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 10 August 2015

Claudio Quintano and Paolo Mazzocchi

Several dimensions of public governance occur while approaching the Shadow Economy (SE) phenomenon. The purpose of this paper is to study the SE by means of the European…

Abstract

Purpose

Several dimensions of public governance occur while approaching the Shadow Economy (SE) phenomenon. The purpose of this paper is to study the SE by means of the European governance analysis by highlighting the main features of implications of the policy options. A statistical significance on the nexus between public governance and the SE appears with respect to the indicators taken into consideration except for the dimensions related to the tax system, which appear to be moderate in magnitude in terms of their effects.

Design/methodology/approach

In order to evaluate data from 32 European Union countries during 2011, a hierarchical component model (HCM) in the context of the structural equation model (SEM) partial least squares (PLS) is utilised. Two different procedures are considered: a two-stage approach (TSA) and the repeated indicators approach (RIA).

Findings

The two procedures (RIA and TSA) proposed in the model have about the same impact on the SE. Evidence suggests that the manifest variables joined to the regulatory system, business regulation and wealth level significantly affect the SE. In contrast, different dimensions connected to the tax system need to be considered to avoid that there be no significant effects on the SE from taxes.

Research limitations/implications

A critical evaluation of the policy implications of the results are included, by focusing on the effects on the SE.

Practical implications

This paper suggests where more emphasis should be placed when referring to the statistical results in dealing with the SE.

Originality/value

To the authors’ knowledge, this is the first attempt to explore the SE while using an HCM (also known as higher order model) performed in a SEM-PLS procedure. The model proposed discerns the relevance and the marginal impact of several dimensions of policy interventions.

Details

Journal of Economic Studies, vol. 42 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 28 July 2020

Roberto Dell'Anno and Omobola Adu

This paper contributes to the literature concerning the Nigerian informal economy (IE) by estimating its size from 1991 to 2017 and identifying the major causes.

Abstract

Purpose

This paper contributes to the literature concerning the Nigerian informal economy (IE) by estimating its size from 1991 to 2017 and identifying the major causes.

Design/methodology/approach

A structural equation approach in the form of the multiple indicators multiple causes (MIMIC) method is used to estimate the size of the Nigerian IE.

Findings

The results indicate that vulnerable employment and urban population as a percentage of the total population are the main drivers of the IE in Nigeria. The IE in Nigeria ranges from 38.83% to 57.55% of gross domestic product (GDP).

Research limitations/implications

As a result of the empirical challenges in the estimation of the IE, the estimates of Nigeria's IE are considered to be rough estimates.

Originality/value

The authors calibrated the MIMIC model with the official estimate of the informal sector published by the Nigerian National Bureau of Statistics (NBS). This was an attempt to combine the national accounting approach, to estimate the size of IE, with the MIMIC approach, and to estimate the trend of informality.

Details

International Journal of Social Economics, vol. 47 no. 8
Type: Research Article
ISSN: 0306-8293

Keywords

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Book part
Publication date: 22 October 2019

Mohammad Nurunnabi

Tax evasion in developing countries is widespread. However, little attention has been paid to tax evasion in developing countries. This chapter addresses two research…

Abstract

Tax evasion in developing countries is widespread. However, little attention has been paid to tax evasion in developing countries. This chapter addresses two research questions: RQ1: What are the determinants of tax evasion of Bangladesh? and RQ2: How do the interests of state actors influence tax evasion? The study focused on a developing country with reference to Bangladesh. This is because Bangladesh exhibits one of the smallest tax to GDP ratios in the world. Using quantitative and qualitative interviews, this chapter sheds light on the impact of state actor(s) role on tax evasion over the period 1981–2014. The state actor(s) failed to institutionalize the norms due to political influence. Results provide evidence that lack of enforcement increases tax evasion. The chapter provides a theoretical framework to study determinants of tax evasion.

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