Shadow economies around the world: what do we really know?

This paper presents estimates of the shadow economy for 110 countries, including developing, transition and developed OECD economies. The average size of the shadow economy as a proportion of official GDP in 1999-2000 in developing countries was 41%, in transition countries 38%, and in OECD countries 17%. An increasing burden of taxation and social security contributions underlies the shadow economy. If the shadow economy increases by 1%, the growth rate of the “official” GDP of developing countries decreases by 0.6%, while in developed and transition economies the shadow economy respectively increases by 0.8% and 1.0%.