The shadow economy in Portugal: An analysis with the MIMIC approach

The paper estimates the Portuguese Shadow Economy (SE) from 1977 to 2004 and tests the statistical relationships between the SE and other economic variables. In order to carry out the econometric analysis, a multiple indicators multiple causes (MIMIC) model with means and intercepts is applied. The main causes of the Portuguese SE are analyzed and economic policies to reduce it are suggested. An appraisal on the reliability of estimates and an alternative benchmark strategy for the MIMIC approach are proposed.