Measuring the underground economy : a conceptual framework and estimation

Horne, Reuben (2006). Measuring the underground economy : a conceptual framework and estimation Master's Thesis, School of Economics, The University of Queensland.

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Author Horne, Reuben
Thesis Title Measuring the underground economy : a conceptual framework and estimation
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2006
Thesis type Master's Thesis
Total pages 93
Language eng
Subjects 1402 Applied Economics
Formatted abstract
This Thesis seeks to address the issue of underground economic activity in a comprehensive manner both theoretically and methodologically. The underground economy is initially defined and broken into two broad segments one encompassing criminal activity and the other involving non criminal illicit economic activity. The possible economic consequences of underground economic activity are discussed at length and both positive and negative assessments of these effects and implications are contemplated. A broad analytical framework inspired by Schneider's 2002 Integrated model is then proposed in which the economic agents of the criminal economy and the illicit non criminal economy are considered in terms of the economic (Homo Oeconon1icus) and the behavioural (Homo Sociologicus) determinants of said agents behaviour. Different sometimes complimentary theories are arranged into this framework. There is a comprehensive summary of the various methodologies that have been used to measure the scale of the underground economy with a focus on Cash Demand, Excess Sensitivity and the increasingly popular psychometrically inspired MIMIC modeling methodologies. The summary is followed by an attempt to measure the scale of the underground economy in Australia using Tanzi's 1983 Cash Demand methodology which produces results considerably smaller than other studies. The implications of these results and the reliability of this form of model are discussed. A critique of the Excess Sensitivity and MIMIC methodologies primarily by Bruesch is summarized together with a rejoinder from Dell'Anno and Schnieder which seeks to address Bruesch's concerns about the MIMIC methodology. Finally the analytical framework is compared to the various methodologies that seek to capture the underground economy and it is concluded that none of the models are constructed in such a manner as to capture what is in essence a highly complicated phenon1enon. In the light of all this it is concluded the underground economy remains a very important area of research that has been thus far inadequately addressed by economists.

Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
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Created: Mon, 04 Oct 2010, 16:49:28 EST by Ning Jing on behalf of Social Sciences and Humanities Library Service