C6- [2012 Barbosa Filho] - an-estimation-of-the-underground-economy-in-brazil





ANALYSIS OF ARTICLE

The article proposes an interesting perspective lowering the expectations of the NOE to 15-20% based on the efficiency of tax collection in Brazil.

It also provides a certain degree of criticism to MIMIC models on NOE estimation, especially regarding the need to calibrate the model with some observed value.

 

 

SUMMARY OF ARTICLE (provides an overview of the Article, with copy & paste of contents, aiming to summarize its contents).

Instead of using MIMIC, the author uses the monetary approach and the labor market approach. His rationale is based on the availability of data which allows for a more direct measure.

Based on the assumption that Brazil’s IRS efficiency is high, the paper concludes that its estimates in the range of 15%-20% are more in line with expectations compared to estimates around 40% obtained by several other authors.

 

The two methodologies applied by the author on the estimation:

-          Monetary Method – use of currency is higher on NOE compared to formal activities.





 

-          Labor Method – based on PNAD, measure the informal labor and the informal labor income in Brazil. The key on this analysis is the assumption that labor represents ~60% of total income in Brazil’s economy.

 

 

 

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