This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

This edited book introduces new research on informal markets and trade in Central Asia and the Caucasus. The research presented in this volume is based on recent field research in Armenia, Georgia, Kazakhstan and Kyrgyzstan, as well as Beijing, Guangzhou, Yiwu and the Xinjiang Uyghur Autonomous Region in China. The nine chapters in this book illustrate how informal markets and trade in Central Asia and the Caucasus have provided space for millions of people across the region to negotiate changes in state and society in the three decades since the breakup of the Soviet Union and the emergence of successor states. Collectively, the book suggests that informality should be seen as a normative order for polities in Central Asia and the Caucasus for three reasons: (1) The inability – or unwillingness – of the states to measure commercial transactions. (2) The highly personalized nature of small business operations that rest on networking and social relations, oral agreements and trust. (3) Markets and bazaars being embedded within states in which clientelism frequently thrives. This book is a significant new contribution to the study of trade and informal markets in Central Asia and the Caucasus, and will be a great resource for academics, researchers and advanced students of Sociology, History, Politics, Business, Economics, Social Anthropology and Geography. The chapters in this book were originally published as a special issue of the journal, Central Asian Survey.

This study estimates the size of the informal economy, and the relative contribution of each underlying factor, for the Caucasus and Central Asia countries in 2008. Using a Multiple Indicator-Multiple Cause model, we find that a burdensome tax system, rigid labor market, low institutional quality, and excessive regulation in financial and products markets are determinant factors in explaining the size of the informal economy, which ranges from 26 percent of GDP in Kyrgyz Republic to around 35 percent of GDP in Armenia. Furthermore, the results show that higher levels of informality increase the levels of self employment and the percentage of currency held outside the banking system.

The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.

This study explores prospects for inclusive growth in the Central Asia and the South Caucasus region and highlights the central role played by the creation of good jobs. The study reviews economic performance in the region and discusses prospects through 2030, introducing two growth scenarios related to the adoption of structural reforms for creating good jobs and inclusive growth. It also highlights the importance of adopting a full policy reform scenario.

We undertake an extended discussion of the latest developments about the existing and new estimation methods of the shadow economy. New results on the shadow economy for 158 countries all over the world are presented over 1991 to 2015. Strengths and weaknesses of these methods are assessed and a critical comparison and evaluation of the methods is carried out. The average size of the shadow economy of the 158 countries over 1991 to 2015 is 31.9 percent. The largest ones are Zimbabwe with 60.6 percent, and Bolivia with 62.3 percent of GDP. The lowest ones are Austria with 8.9 percent, and Switzerland with 7.2 percent. The new methods, especially the new macro method, Currency Demand Approach (CDA) and Multiple Indicators Multiple Causes (MIMIC) in a structured hybrid-model based estimation procedure, are promising approaches from an econometric standpoint, alongside some new micro estimates. These estimations come quite close to others used by statistical offices or based on surveys.

This paper examines the drivers, and reestimates the size of shadow economies in Europe, with a focus on the emerging economies, and recommends policies to increase formality. The size of shadow economies declined across Europe in recent years but remains significant, especially in Eastern Europe. In the emerging European economies, the key determinants of shadow economy size are regulatory quality, government effectiveness, and human capital. The paper argues that a comprehensive package of reforms, focused on country-specific drivers, is needed to successfully combat the shadow economy. The menu of policies most relevant for Europe’s emerging economies include: reducing regulatory and administrative burdens, promoting transparency and improving government effectiveness, as well as improving tax compliance, automating procedures, and promoting electronic payments.