Revisiting the Relationship between Shadow Economy and the Level of Unemployment Rate. A SVAR Empirical Ivestigation for the Case of United States

摘要

The paper analyses the relationship between shadow economy and unemployment rate using a Structural VAR approach for quarterly data during the period 1982-2011. The size of the shadow economy as % of official GDP is estimated using a Structural Equation Approach with quarterly data for the period 1982-2011.Thus, the shadow economy is modeled like a latent variable using a special case of the structural equation models-the MIMIC model. His dimension is decreasing over the last two decades. The relationship between the two variables is further tested by imposing a long-run restriction in the Structural VAR model to analyze the impact of the shadow economy to a temporary shock in unemployment. The impulse response function generated by the Structural VAR confirms that in the short-run, a rise in the unemployment rate in formal sector will lead to an increase in the number of people who work in the shadow economy.