Friedrich Schneider

Friedrich Schneider (born 16/02/1949 in Konstanz, Germany) has been Professor of Economics at Johannes Kepler University of Linz, Austria since 1986.

He obtained his PhD in Economics from the University of Konstanz in 1976. From 1991–1996 he was Dean of Social Science and Economics and from 1996–2007 Vice President for Foreign Affairs at Johannes Kepler University of Linz. He was President of the Austrian Economic Association from 1997–1999 and President of the German Economic Association from 2005–2008. He has also been consultant to numerous organisations including the Brussels EU Commission, IMF and World Bank.

He has published extensively in leading economics journals including The American Economic Review, The Quarterly Journal of Economics, The Economic Journal, Public Choice, Kyklos and the Journal of Economic Literature. He has also published numerous books including Readings in Public Choice and Constitutional Political Economy (together with Charles K. Rowley, Springer Publishing Company 2008). He was the editor of the Journal of Public Choice from 1991–2004 and Perspektiven der Wirtschaftspolitik from 2000–2004.

Papers Published in World Economics:

Shedding Light on the Shadow Economy

The shadow or informal economy covers all economic activities which are hidden from official authorities for monetary, regulatory and institutional reasons. Although widely used, multiple indicator-multiple cause (MIMIC) models have been criticised, and we develop a modified model and database covering 157 countries over the years 1991 to 2017. We tested our model using satellite data on nocturnal light intensity as a proxy for the size of countries’ economies, and compared our results with the figures of 23 countries’ national statistical offices, finding stable and similar results. The average over all countries and over the whole period is 30.9% of GDP. The shadow economy is large in some regions (Latin America and sub-Saharan Africa) and there is sizeable heterogeneity within regions. On average, from 1991 to 2017 the shadow economy declined by 6.8%. In the short term the shadow economy has a negative impact on the official one and in the long term it has a positive effect.

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A Comparison of Different Methods of Estimating the Size of the Shadow Economy

This paper describes and criticizes the MIMIC estimation method due to a double counting problem; a correction is suggested. The measurement methods used for National Accounts Statistics are discussed – the discrepancy method and two new micro survey methods – are described and a third, a micro method, using a combination of company manager surveys and their knowledge to calibrate the size of the shadow economy in firms, is presented. A detailed comparison of the four micro estimation methods with the MIMIC and the corrected MIMIC method are offered. One major result is that the corrected MIMIC method, especially, comes quite close to various types of lately developed micro survey methods.

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The Shadow Economy Labour Force

In this paper, the main focus lies on the development and size of the shadow economy labour force in OECD, developing and transition countries. Besides informal employment in the rural and non-rural sector, other measures of informal employment like the share of employees not covered by social security, own account workers or unpaid family workers are also shown. The most influential factors on the shadow labour force are tax policies and state regulation, which, if they rise, increase both. Furthermore the discussion of the recent literature underlines that economic opportunities, the overall situation on the labour market and unemployment are crucial for an understanding of the dynamics of the shadow economy and especially the shadow labour force.

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What Do We Know About the Shadow Economy?

Estimates of the size of the shadow economy in 21 OECD countries are presented. The average size of the shadow economy (as a percentage of ‘official’ GDP) over 1999/2000 in these countries is 16.7%. The author concludes that it is the increasing burden of taxation and social security contributions, combined with rising state regulatory activities, that are the driving forces for the recent growth in size of the shadow economy in the countries concerned.

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