Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach

Abstract

Greek economy suffers from economic crisis for over a decade. A continuing problem has been the persistence of a large shadow economy which results in a gap between the tax and social security contribution owed and collected. In this paper, the size of shadow economy (SE) in Greece is estimated using a flexible MIMIC approach with time series data from 2000 to 2018. Our variables focused on instead of in most representative data of the Greek economy as causes (e.g. unemployment, self–employment, epidemic etc.) and indicators (official economy, energy consumption, income inequality and poverty, labour force participation). We found that the average size of shadow economy in Greece was up to 37.63% for the reference period, above the average size of other studies up to 23.35%. The study focuses on the significance of each determinant of the shadow economy, resulting in an improved estimation method to identify and tackle shadow transactions and increase public revenues.

JEL Classification: O17, C20, D73, E26