An expenditure-based estimate of Britain's black economy
AuthorPissarides, Christopher A.
SourceJournal of Public Economics
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We estimate the size of Britain's black economy (defined narrowly as unreported taxable income) by using income and expenditure data drawn from the 1982 Family Expenditure Survey. Our working assumptions are that all income groups report expenditure on food correctlyemployees in employment report income correctlyand that the self-employed under- report their income. We estimate food exependiture equations for all groups and then invert them to arrive at the conclusion that on average true self-employment income is 1.55 times as much as reported self-employment income. This implies that the size of the black economy is about 5.5 percent of GDP. © 1989.