Shadow Economies around the World: Model Based Estimates

Abstract

In this paper, relying on a two-sector dynamic general equilibrium model, we propose and then use a new methodology to construct a novel shadow economy dataset. We calibrate our model to match various reported macroeconomic variables and then back out the size of the shadow economy from the calibrated model. This allows us to construct an unbalanced 161-country panel dataset over the period 1950 and 2009. This aims to be the largest dataset in the literature, particularly with its time-series dimension. We also present certain features of the data along with various descriptive statistics. JEL codes:. E26, H26, O17, O41.