Graduate Program
Economics
Degree Name
Master of Arts (MA)
Semester of Degree Completion
2011
Thesis Director
Mukti Upadhyay
Thesis Committee Member
Linda Ghent
Thesis Committee Member
James Bruehler
Abstract
The informal sector has always been assumed to exist but was not studied intently until the 1970s when economic events in the US and Europe led scholars to consider just how much economic activity was occurring but not being accounted for. Since that time it has been studied more vigorously but very little progress has been made in understanding it.
In this paper I develop estimates of the size of the informal sector using two different methods. First, a panel of estimates for several Latin American countries will be constructed using the Multiple Indicators Multiple Causes (MIMIC) method for several years. Next, I will create a time-series of estimates for Chile using the Currency Demand (CD) method.
The MIMIC method was chosen because it allows a complete model of informality to be employed as opposed to single-indicator methods such as currency demand and physical input. This method has been employed in the past by several researchers going back to Frey and Weck-Hannemann (1984) and is well-documented (though also criticized) by Breusch (2005).
The CD method is used in the second part because it is well-documented, theoretically sound and can be easily employed in a time-series setting. I will generally follow procedures used by other authors, making modifications where necessary or logical.
Recommended Citation
Lesica, George T., "Estimating The Size Of The Informal Sector In Latin America" (2011). Masters Theses. 203.
https://thekeep.eiu.edu/theses/203
