Measuring the size of Ireland's black economy
Citation:
Fagan, Gabriel. 'Measuring the size of Ireland's black economy'. - Dublin: Journal of the Statistical and Social Inquiry Society of Ireland,Vol. XXVII, 1993/1994, pp1-30Download Item:
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Abstract:
Official estimates of national income are widely used in economic analysis,
particularly in monitoring trends in national output and living standards over time
and also in comparing relative income levels across countries. The adequacy of
these estimates as a measure of economic welfare has long been questioned because
they, by definition, exclude items such as household production, the costs of
pollution etc. Another school of criticism, however, argues that these estimates are
seriously flawed because they exclude a significant portion of activity which should
be included but which is hidden from the authorities for various reasons, mainly tax
evasion. In its extreme form (e.g. Feige 1979) it is claimed that this 'black economy1
is so extensive and that its growth in the 1970s and 1980s has been so significant
that official estimates of GNP are no longer a reliable basis for formulating policy.
In this view, for example, the phenomenon of weak output growth during the
stagflation in the 1970s was a statistical illusion due to the massive shift from the
official to the black economy.
In this paper we try to assess the extent to which official estimates of national
income in Ireland are affected by black economy activities. The first section begins
by defining what we mean by the term 'black economy' drawing from discussions in
international literature. This is followed by a brief overview of the methods used to
construct Ireland's national accounts with a view to assessing the possible impact of
black economy activity on official estimates of GNP. The third section reviews the
techniques which are available to estimate the scale of the black economy. The
following sections present the results of applying these techniques to the Irish case.
Description:
Read before the Society, 7 October 1993
Author: Fagan, Gabriel
Publisher:
Statistical and Social Inquiry Society of IrelandType of material:
Journal articleCollections:
Series/Report no:
Journal of the Statistical and Social Inquiry Society of IrelandVol. XXVII 1993/1994
Availability:
Full text availableKeywords:
Black economy, Gross domestic productISSN:
00814776Licences: