MIT11_481Js09_lec19b

MIT11_481Js09_lec19b - MIT OpenCourseWare...

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Unformatted text preview: MIT OpenCourseWare http://ocw.mit.edu 11.481J / 1.284J / ESD.192J Analyzing and Accounting for Regional Economic Growth Spring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms . IMPUTATIONS NATIONAL INCOME AND PRODUCT ACCOUNTS Kendrick, John. 1979. Expanding Imputed Values in the National Income and Product Accounts The Review of Income and Wealth. 25 (4): 349-363. Carol Carson. 1984. "The Underground Economy: An Introduction," Survey of Current Business , 64 (5) (May): 21-37. Edgar L. Feige, 1990. Defining and Estimating Underground and Informal Economies: The New Institutional Economics Approach World Development, 18 (7): 989-1000 MIT 11.481J, 1.284J, ESD.192J ANALYZING AND ACCOUNTING FOR REGIONAL ECONOMIC GROWTH DEFINITIONS Conceptual framework New institutional economics relationships between the economy and institutions determine the rules of the game for economic exchange. Definition Underground economy: economic activities that do not adhere to, or are not protected by, the rules of the game. BACKGROUND AND ASSUMPTIONS Background imputations are made to place a market value on certain transactions that do not occur or observable in the market economythat affect personal income. Capture non-market, non-economic activities in National Income Product Accounts (NIPA) 8.7% GNP in 1929; 7.6% GNP in 1979 General Assumptions Intermediate products to be included in GNP Clear delineation between economic and non-economic activities Market price is more appropriate than opportunity price (cost) in imputation. A TAXONOMY OF UNDERGROUND ECONOMIES Rules of the game being circumvented Examples Economic Implications Measurement Illegal Criminal laws Drug trafficking Reduces transaction costs; Hedges against fluctuations Anecdotal information Unreported Tax laws Unreported income Budget deficits, greater reliance on monetary policy; Distorts costs for actors in unreported economy; Biased measuring growth rate Discrepancies; Currency ratio Unrecorded Requirements of statistical agencies Housework Distorts evaluation of economic indicators and policy changes Discrepancies; Currency ratio Informal Administrative rules covering property rights, contracts, and licensing. Informal land sales, unlicensed vendors All of the above. Qualitative or survey methods SOURCE Amy Deora and Feiya Huang, 2005 MEASUREMENT METHODS Measurement Data source Examples Strengths Weaknesses Anecdotal Information Individual observations Participant observations Analyzing activity that evades detection Difficult to analyze systematically Micro-level Survey data Imputations of informal sector Analyzing characteristics of underground actors; Testing hypotheses about the effects of the rules of the game Costly; Biased; Inconsistent over time....
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MIT11_481Js09_lec19b - MIT OpenCourseWare...

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