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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.

Informal sector (Economics) --- Hidden economy --- Parallel economy --- Second economy --- Shadow economy --- Subterranean economy --- Underground economy --- Artisans --- Economics --- Small business --- Labor --- Macroeconomics --- Money and Monetary Policy --- Economics: General --- Multiple or Simultaneous Equation Models: Other --- Model Construction and Estimation --- Methodology for Collecting, Estimating, and Organizing Macroeconomic Data --- Data Access --- Structure, Scope, and Performance of Government --- Tax Evasion and Avoidance --- Informal Economy --- Underground Econom --- General Aggregative Models: General --- Labor Standards: Labor Force Composition --- Labor Economics: General --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Economics of specific sectors --- Labour --- income economics --- Monetary economics --- Informal economy --- National accounts --- Labor force participation --- Currencies --- Economic sectors --- Money --- Informal sector --- National income --- Labor market --- Labor economics --- Slovak Republic --- Income economics

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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.

Labor --- Economics: General --- Informal Economy --- Underground Econom --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Labor Standards: Labor Force Composition --- Economics of specific sectors --- Labour --- income economics --- Informal economy --- Informal employment --- Human capital --- Public employment --- Labor force participation --- Informal sector --- Economics --- Economic theory --- Labor market --- Income economics