A FUZZY MODEL TO ESTIMATE ROMANIAN UNDERGROUND ECONOMY

I propose here a model based on fuzzy logic in order to “quantify” Romanian underground economy. This approach starts from MIMIC model variables used by many authors in estimating underground economy in all over the world. I also assumed there can be establish a positive relation between a number of causal variables and underground economy. The model uses a set of variables whose choice is based on both economic theory and empirical observations. These variables determinate underground activities. The choice of variables can be considered subjective and the input variables set can be modified depending on the availability of data need. However, it should be noted that each of these variables have a lesser or greater contribution to underground activities development. Fuzzy logic language permits us to formulate rules such as “if the taxation rate is high, then the underground economy is large”. Using statistical series it can be establish a basic “normal” value for a given period against which all the variables magnitude can be calculated. The “normal” value for each series and each year is actually an average of previous time values. Many rules can be formulated, but they depend on number and values of variables considered.