Abstract
Much of the hidden economy literature suggests an inverse relationship between the health of the formal and hidden economies — a suggestion with important implications for both economics and politics. This paper examines, conceptually and empirically, the nature of this relationship for a number of countries. It suggests, cautiously, a less straightforward picture: the size of the hidden economy is generally positively related to the size of the measured economy — but also to inflation, while unemployment has no clear effect. The paper concludes that structural rather than cyclical phenomena may explain the growth of the hidden economy.
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O’Higgins, M. (1985). The Relationship between the Formal and Hidden Economies: An Exploratory Analysis for Four Countries. In: Gaertner, W., Wenig, A. (eds) The Economics of the Shadow Economy. Studies in Contemporary Economics, vol 15. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-88408-5_8
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DOI: https://doi.org/10.1007/978-3-642-88408-5_8
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