Shadow economies around the world : new results for 158 countries over 1991-2015

This paper is a first attempt to estimate the size and development of the shadow economy of 158 countries over the period 1991 up to 2015. Using the Multiple Indicators, Multiple Causes (MIMIC) method we apply for the first time (i) the light intensity approach instead of GDP avoiding the problem that quite often GDP is used as a cause and indicator variable, (ii) the Predictive Mean Matching (PMM) method, and (iii) a variety of robustness tests. Results suggest that the average size of the shadow economy of these 158 countries over 1991-2015 is 32.5% of official GDP, which was 34.82% in 1991 and decreased to 30.66% in 2015. The lowest size of the shadow economy East Asian countries with 16.77% averaged over the period 1991- 2015, then follows OECD countries with 18.7% and the highest value have Latin American and sub-Saharan African countries with values above 35%.