Where in the United States are the largest shadow economies?

US shadow economies: A state-level study

Travis Wiseman
Constitutional Political Economy, December 2013, Pages 310-335

Recent studies of shadow economies focus primarily on cross-country comparisons. Few have examined regional or state-level variations in underground economic activity. This paper presents estimates of the shadow economy for 50 US states over the period 1997-2008. Results suggest that tax and social welfare burdens, labor market regulations, and intensity of regulation enforcement are important determinants of the underground economy. Among the states, Delaware, on average, maintains the smallest shadow economy at 7.28 % of GDP; Oregon, on average, has the second smallest shadow economy at 7.41 % of GDP; followed by Colorado, averaging 7.52 % of GDP, rounding out the three smallest shadow economies in the US West Virginia and Mississippi, on average, have the largest shadow economies in the US as a percent of GDP (9.32 and 9.54 %, respectively).

There are (gated?) versions of the paper here.  For the pointer I thank Rob Raffety who I believe in turn is relying on Kevin Lewis.  This pdf, by the way, offers data on the generally larger shadow economies of Europe.


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