Transcript The Size and Determinants of UE in Croatia

THE SIZE AND DETERMINANTS OF
THE UNOFFICIAL ECONOMY IN
CROATIA
Prepared by Davor Mikulić
Zagreb, Semptember 2015
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Scope of the paper
• Overview of unofficial economy estimates in
Croatia and new member states (NMS)
– Exhaustiveness of national accounts results
– MIMIC approach estimates
• Identification of UE determinants
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Non-exhaustiveness types (national
accouts approach):
N1 – Deliberately non-registered (underground )
N2 – Illegal producers
N3 – Not required to register
N4 – Legal persons not surveyed
N5 – Registered entrepreneurs not surveyed
N6 – Producers deliberately misreporting
N7 – Other statistical deficiencies
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MIMIC approach (Schneider)
Structural model: determine the relationship
between an unobservable variable (unofficial
economy) and a set of indicators related to UE
Indicators: GDP, money in circulation,
participation rate
Causes: size of government, share of direct
taxation, fiscal freedom, business freedom,
unemployment rate, government effectiveness
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Estimates of unofficial economy in Croatia
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Is Eurostat approach conservative?
Eurostat
bil. HRK
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Unofficial economy
GDP
GVA
GVA before UE
330
278
255
Imputed NA items (dwelling rents, FISIM…)
GVA before imputed NA items
GVA, government units
GVA - GOV - IMPUTED
GVA, FIN INST
GVA, LARGE ENT (50+)
GVA, SMALL UNITS (<50)
Monetary household income (HBS)
30
225
50
175
16
95
64
120
MIMIC
93
UE, as % of category
7,0
28,2
8,3
33,5
9,1
36,5
10,3
41,4
13,2
53,2
36,3
19,3
146,0
77,5
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Comparison of UE estimates (MIMIC and
NOE approach)
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Bulgaria
Croatia
Estonia
MIMIC
35
30
Poland
25
Latvia
Hungary
Slovenia
20
Romania
Lithuania
Czech
Slovakia
15
5
10
15
20
NOE Adjustment
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Comparison of UE estimates
Reference
period
NMS
Bulgaria
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Slovenia
Slovakia
OECD-EU
Austria
Belgium
Ireland
Italy
Netherlands
Spain
Sweden
Croatia
2001
2000
2002
2000
2000
2002
2002
2002
2002
2002
2001
2002
1998
2003
1995
2000
2000
2000
Adjustment for
NOE in national
accounts
Buehn, Schneider
(2012)
Ratio Buehn, Schneider
(2012) NOE
12.0
10.2
7.7
9.6
11.9
14.4
18.9
7.8
17.7
6.9
14.6
6,2
7,9
3,0
4,0
14,8
1,0
11,2
1,3
10,1
28.2
36.6
19.1
32.0
25.1
29.8
32.8
27.7
33.5
26.6
18.6
18,6
9,7
22,0
16,1
27,0
13,3
22,7
19,2
33,4
2.4
3.6
2.5
3.3
2.1
2.1
1.7
3.6
1.9
3.9
1.3
6,4
1,2
7,3
4,0
1,8
13,3
2,0
14,8
3,3
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Unoffical economy and GDPpc
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Unoffical economy and corruption
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Econometric tests of determinants of UE in new
member states
• Depedent variable: UE NOE (model 1) and UE MIMIC
(model 2)
• Period: 2000-2011
• Panel data – fixed effects
• yi,t =α +βXi,t + ei,t (1)
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Determinants of the unofficial economy in economic
literature
• Burdens on the official economy;
• Public sector services;
• Tax morality and government controls;
• Labour market conditions;
• Structural factors.
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Causes of unofficial economy in new EU member states and Croatia
Variable
Constant
Government spending
Index of economic
freedom
GDP per capita
Freedom from corruption
Adjusted R2
Redundant cross section
fixed effects LR testF
statistics (p-value)
Number of observation
Dependant variable: UE
Dependant variable: UE
estimates based on MIMIC estimates based on Eurostat
approach
approach
Estimated parameters
41.036*** (43.01)
0.02071 *** (2.92)
-0.1137*** (-5.67)
Estimated parameters
5.34*** (2.94)
0.196 *** (3.98)
0.153*** (4.49)
-0.00041 *** (-13.57)
-0.031 ** (-2.21)
0.9896
-0.00029 *** (-5.41)
-0.075 *** (-3.12)
0,933
386.28*** (0.000)
92.24*** (0,000)
132
132
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CONCLUDING REMARKS
Significant
differences in UE in NMS
Exhaustiveness
of national accounts results in lower estimate of
unofficial economy in comparison to MIMIC
Lower
variability in MIMIC estimates for individual countries
Government
expenses, as broadest indicator of costs
government posed to the official economic units, turned to be
more significant than revenues
Improvement
in overal institutional framework reduces the
share of unofficial economy
Official
and the unofficial economy in NMS are substitutes not
complements
Impact
of economic freedom is unclear
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Thank you!
☺
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