Underground economy in Turkey and estimating its size in the Turkish economy (1980-2005 period analysis)

Underground economy is one of tbe hot topics in Turkey which is discussedfrequently in recent times. There is no specific consensus on the scope of undergroundeconomy, however by the works of Schneider(1998, 2005), Fiege(1986, 1996), Tanzi(1983,1999) and others, the scientific basis is established. In this paper, the definiton and thecontent of the underground economy is emphasized and the reasons of the undergroundeconomy's existance will be argued. Then the effects on the general economy will be stated.Finally, the emprical results about the size of the underground economy in Turkey will bereported.The methods used to estimate the size of the underground economy are: NationalIncome Differences Approach, Tax Auditing Approach, Simple Electricty ConsumptionApproach, Simple Monetary Ratio Approach, Improved Monetary Ratio Approach and theeconometric Approach.. The findings of these methods somewhat differ from each other,because each method based on different variables and also focus on different view of theunderground economy.According to the emprical findings, the size of the underground economy is found54% of GNP by using Tax Auditing Approach. The ratio of underground economy to theGNP is %32 according to the results ıf Monetary Ratio Analysis and %34 according to theeconometric analysis. Nevertheless it is observed that the size of the underground economyis sensitive to the changes of economic and political progress.1) Underground Economy, 2) Tax Auditing Approach, 3) ElectrictyKey Word:Consumption Approach 4) Monetary Ratios Approach,5) Econometric Method