Cover: Estimating the Shadow Economy

Estimating the Shadow Economy

A Comment

Published 1985

by Peter Reuter


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Frey and Weck have presented a causal model of the shadow economy to classify OECD nations according to whether they had shadow economies which were relatively large, relatively small, or of uncertain size, and to analyze patterns of growth in the shadow economy. Taxes, regulations, and some labor force variables are the specified causal factors. This comment argues that (1) taxes and regulations are very heterogeneous collections of instruments, with widely differing shadow economy consequences, (2) inappropriate variables are chosen for some of the causal variables, and (3) certain labor force variables are incorrectly treated as exogenous.

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