Brambila Macias, Jose (2008): The Dynamics of Parallel Economies. Measuring the Informal Sector in México.
Download (330kB) | Preview
The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980’s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long run relationship between informality and economic growth.
|Item Type:||MPRA Paper|
|Original Title:||The Dynamics of Parallel Economies. Measuring the Informal Sector in México|
|Keywords:||Informal Sector; currency demand; VEC; Remittances|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements
F - International Economics > F2 - International Factor Movements and International Business > F24 - Remittances
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
|Depositing User:||Jose Brambila-Macias|
|Date Deposited:||23. Apr 2008 14:49|
|Last Modified:||29. Aug 2015 12:57|
Ahumada, H., F. Alvarado and A. Canavese (2006), “The Demand for Currency Approach and the Size of the Sahdow Economy: a Critical Assessment”, Berkeley Program in Law & Economics, Working Paper Series, Paper n. 192. University of California, Berkeley.
Bovi, M. (1999), “Un miglioramento del metodo di Tanzi per la stima dell’economia sommersa in Italia”, ISTAT, Rivista di Statistica Ufficiale, n. 2.
Bovi, M., and L. Castellucci (2001), “Cosa sappiamo dell’economia sommersa in Italia al di là dei luoghi comuni? Alcune proposizioni empiricamente fondate”, Economia Pubblica, Anno XXXI n. 6, pp. 77-119.
Bovi, M., and R. Dell'Anno (2007), "The Changing Nature of the OECD Shadow Economy," ISAE Working Papers 81, ISAE - Institute for Studies and Economic Analyses - Rome, Italy.
Bulíř, A., and A. Swiston (2006), “What Explains Private Saving in Mexico?”, IMF Working Paper, n. 06/191, International Monetary Fund, Washington DC.
Cagan, P. (1958), “The demand for currency relative to money supply”, Journal of Political Economy, 66, pp. 302-328.
Chaudhuri, K., S. Chattopadhyay, and F. Schneider (2006), “The Size and Development of The Shadow Economy: An Empirical Investigation from States of India”, Journal of Development Economics, 80(2), pp. 428-443.
Chiarini, B., and E. Marzano (2004), “Dimensione e Dinamica dell’Economia Sommersa: Un approfondimento del Currency Demand Approach.” Working Paper n. 4.2004, Università degli Studi di Napoli “Parthenope”, Istituto di Studi Economici, Italy.
De Soto, H. (1989), “The Other Path”, Harper and Row, New York.
Feige, E. (1979), “How big is the irregular economy?”, Challenge, 22, pp. 5-13.
Frey, B., and H. Weck-Hanneman (1984), “The Hidden Economy as an Unobservable variable”. European Economic Review, 26(1), pp. 33-53.
Giles, D., and L. Tedds (2002), “Taxes and The Canadian Underground Economy”, Canadian Tax Foundation Toronto, Paper n. 106, Canada.
Guissarri, A. (1987), “La Demanda de Circulante y la Informalidad en Argentina”, Cuadernos de Economia, 72, pp.197-224.
Gutmann, P. (1977), “Subterranean economy”, Financial Analysis Journal, 33, pp.26-27.
Helberger, C., and H. Knepel (1988), “How big is the shadow economy? A re-analysis of the Unobserved variable approach of B. S. Frey and H. Weck-Hannemann”, European Economic Journal, 32, pp. 965-76.
Hendry, D., (1995), “Dynamic Econometrics”, Oxford University Press, Oxford, UK.
Hernandez-Coss, R. (2005), “The U.S.-Mexico Remittance Corridor. Lessons on Shifting from informal to formal transfer systems”, Working Paper n. 47, The World Bank, Washington, DC.
IMF Country Report (2005), “Mexico: Selected Issues”, Report 05/428, International Monetary Fund, Washington DC.
Kaufmann, D., and A. Kaliberda (1996), “Integrating the unofficial economy into the dynamics of the post-socialist economies: A framework of analysis and evidence”, in B. Kaminski (ed.), Economic transition in Russia and the new states of Eurasia. Armont, New York: M.E. Sharpe, Inc.
Klovland, J. (1984), “Tax evasion and demand for currency in Norway and Sweden. Is there a hidden relationship?”, Scandinavian Journal of Economics, 86, pp. 423-439.
Loayza, N. (1997), “The economics of the informal sector: a simple model and some empirical evidence from Latin America”, World Bank Policy Research Working Paper, WPS 1727, The World Bank, Washington, DC.
OECD (2002), “Measuring the Non-Observed Economy - A Handbook”, Statistics Directorate, Paris, France.
OECD (2007a), “Policy Coherence for Development--Migration and developing countries”, The Development Centre, Paris, France.
Öğǘnç, F., and G. Yilmaz (2000), “Estimating the Underground Economy in Turkey”, Discussion Paper, The Central Bank of the Republic of Turkey, Turkey.
Portes, A., M. Castells and L. Benton (1989), “ World underneath: The origins, dynamics, and effects of the informal economy”, in: Portes, A., M. Castells and L. Benton (eds.), The informal economy: Studies in advanced and less developed countries. Johns Hopkins University Press, Baltimore.
Portes, A. and W. Haller (2005), "The Informal Economy", in: N. Smelser and R. Swedberg (eds.), Handbook of Economic Sociology, 2nd edition, Russell Sage Foundation.
Roubaud, F.(1995), “La Economia Informal en Mexico. De la esfera domestica a la dinamica macroeconomica”, Fondo de Cultura Economica, Mexico.
Schneider, F. and D. Enste (2000), “Shadow economies: size, causes and consequences”, Journal of Economic Literature, American Economic Association, 38, pp. 77-114.
Schneider, F. (2002), “Size and measurement of the informal economy in 110 countries around the world”, Rapid Response Unit, The World Bank, Washington, DC.
Shima, I. (2004), “The shadow economy in Norway: Demand for currency approach”, Memorandum n. 10/2004, Frisch Center of Economic Research & Department of Economics, University of Oslo, Norway.
Spiro, P. (1996), “Monetary Estimates of the Underground Economy: A Critical Evaluation”, The Canadian Journal of Economics / Revue Canadienne d’Economique, 29, pp. S171-S175.
Tanzi, V. (1983), “The underground economy in the United States: Annual estimates, 1930-1980”, IMF Staff Papers, 33, International Monetary Fund, pp. 283-305.
Tedds, L. (1998), “Measuring the size of the hidden Economy in Canada”, MA extended essay. University of Victoria, Department of Economics, Canada.
The International Bank for Reconstruction and Development / The World Bank (2007), “Close to Home. The Development Impact of Remittances in Latin America”, Washington, DC.
Vuletin, G. (2006), “What is the size of the Pie? Measuring the Informal Economy in Latin American and the Caribbean.” Forthcoming IMF Working Paper, International Monetary Fund, Washington, DC.
World Bank (2006), “Global Economic Prospects 2006─Economic Implications of Remittances and Migration”, The World Bank, Washington, DC.