Size, Causes and Consequences of the Underground Economy: An International Perspective

Size, Causes and Consequences of the Underground Economy: An International Perspective, by Christopher Bajada and Friedrich Schneider (eds) (Ashgate, Aldershot UK, 2005), pp. xi + 295.

This is a collection of 14 papers by 19 authors, edited by leaders in the field. Bajada has two recent papers

in The Economic Record on the subject, as well as other journal articles and several books, while Schneider lists an enormous professional output on his website, half of which relates to Schattenwirtschaft ('shadow economy'). Other contributors to this volume, notably Bruno Frey and Steinar Strom, have been writing in the area for decades.

The literature generally is plagued by vague and changing definitions. Sometimes these are coded in various adjectives: underground, shadow, black, informal, unobserved, unrecorded, unreported, unofficial, irregular, cash, hidden, parallel, etc. Writers also vary their choice of expression for artistic effect or to avoid repetition, whereas terms such as 'underground economy' are given different meanings in different contexts. Most of the chapters in this book that make 'size' calculations are attempting to measure shortfalls in official gross domestic product (GDP) estimates, although in one case the focus is the gap between actual and potential tax collections. In contrast, the 'causes' are typically motives for compliance or non-compliance with tax laws. The third part of the title, 'consequences', is given less attention in the book, although when it is addressed it embraces a much broader agenda including welfare fraud and evasion of labour and product-quality regulations. The reader who expects the Editors to impose consistency in definition and terminology will be disappointed.