International Comparison of the Black Economy: Empirical Evidence Using Micro-level Data

Abstract

We estimate the size of black economies in four countries(Korea, Taiwan, Germany, Russia) for comparative analysis using LIS data as well as Korean survey data. Black economy is defined as the difference between the reported income and the real income for the self-employed group. We use the income-expenditure approach to estimate the real income of self-employed under the assumption that self-employed group has the same pattern of consumption as salsry paid.

We find that Korea has a black economy of 20.31%. Taiwan & Germany show the lower level than Korea, which are 16.52% and 8.09% respectively. However, Russia in transitional economy show much higher level than other countries, which are 74.94%. We also find that the higher income group has a greater tendency to underreport their incomes than the lower income groups. It is further found that as economies grow, the size of black economies correspondingly decrease.