Hidden income of households: an empirical evidence

TERRA ECONOMICUS, , Vol. 14 (no. 4),

The paper presents the results of micro-data analysis, showing distribution and level of household hidden income. Modern trends in foreign and Russian studies on hidden income of population are described. Econometric evaluation of the extent of hidden income relies on the panel data of “The Russia Longitudinal Monitoring Survey – Higher School of Economics (RLMS-HSE)” (covering the period from 2006 to 2014). The analysis uses the logistic regression model, with the binary variable as the dependent variable, which equals 1 when current household expenses and savings exceed the household disposable resources for two adjacent periods. This method enables the author to identify households that use to consistently underestimate their income. As the findings have shown, a large number of households underestimate their income regularly. Thereby distortions in the interpretation of welfare indicators such as inequality and poverty take place. The relationship is identified between the presence of household hidden income and other socio-economic characteristics of households, their income level and settlement behavior. It is argued that the assessment of the household consumption is a more reliable indicator of well-being compared to the current cash income.

Keywords: households; hidden income; disposable resources; consumption expenditure; poverty

  • Barsukova S. (2005). Structure and institutes of informal economy. The Sociological Journal, no. 3, pp. 118–134. (In Russian.)
  • Burov V.Yu. (2011). Shadow activity of small businesses. Germany: LAP Lambert Academic Publishing GmbH & Co, 225 p. (In Russian.)
  • Chaplia V.V. (2003). The Shadow economy and the problems of economic growth. Economic Herald of Rostov state University, vol. 1, no. 4, pp. 124–127. (In Russian.)
  • Eliseeva I.I. and Shirina A.N. (eds.) (2003). Measurement of shadow economic activity. Saint-Petersburg: St. Petersburg University of Economics and Finance, 269 p. (In Russian.)
  • Koryagina T.I. (2000). The Growth of the shadow economy – a challenge for theorists and for state statistics. Economics and mathematical methods, vol. 36, no. 4. (In Russian.)
  • Kostin A.V. (2011). The experience of estimation the size of the shadow economy in western literature. Bulletin of the Novosibirsk State University. Series: Socio-economic Sciences, vol. 11, issue 4, pp. 33–43. (In Russian.)
  • Latov Yu.V. and Kovalev S.N. (2006). The shadow economy. Мoscow: Norma Publ., 336 p. (In Russian.)
  • Murashov Ya.V. and Ratnikova T.A. (2016). Under-reported income of Russian households. Voprosy Ekonomiki, no. 5, pp. 1–28. (In Russian.)
  • Nivorozhkina L.I. and Sinyavskaya T.G. (2012). The concept of statistical assessment of risks related to financial institutions clients involvement customers in money laundering schemes. Terra Economicus, vol. 10, no. 4, pp. 30–36. (In Russian.)
  • Nureev R.M. and Akhmadeev D.R. (2015a). Classification of the informal employment and the methods of its assessment. Теrrа Economicus, vol. 13, no. 1, pp. 14–29. (In Russian.)
  • Nureev R.M. and Akhmadeev D.R. (2015b). Formal and informal employment as «twins brothers»: modern Russian practice. Теrrа Economicus, vol. 13, no. 3, pp. 16–33. (In Russian.)
  • Popov V.V. (2002). Methods of measurement of shadow economy and their use in postSoviet Russia / In: Timofeev L.M. and Latov Yu.V. (eds.) Economic theory of crime and
  • punishment. The shadow economy in Soviet and post-Soviet societies, issue 4/2. Moscow. (In Russian.)
  • Ryabushkin B.T. and Churilova E.Yu. (2003). Methods of estimating the shadow and informal sectors of economy. Moscow: Finansy I statistika Publ., 143 p. (In Russian.)
  • Voronkova O.V. (2010). Foreign experience of research on illegal incomes. Теrrа Economicus, vol. 8, no. 4, pp. 82–89. (In Russian.)
  • Del Boca D. (1981). Parallel Economy and Allocation of Time. Micros-Quarterly Journal of Microeconomics, vol. 4 (2), pp. 13–18.
  • Cagan Ph. (1958). The Demand for Currency Relative to the Total Money Supply. Journal of Political Economy, vol. 66 (3), pp. 302–328.
  • Johnson S., Kaufman D. and Shleifer A. (1997). The Unofficial Economy in Transition. Brookings Papers on Economic Activity, Fall. Washington D.C.
  • MacAfee K. (1980). A Glimpse of the Hidden Economy in the National Accounts. Economic Trends, vol. 136, pp. 81–87.
  • O’Higgins M. Assessing the Underground Economy in the United Kingdom / In: Feige E.L. (ed.) (1989). The Underground Economies: Tax Evasion and Information Distortion. Cambridge: Cambridge Univ. Press, pp. 175–195.
  • Pissarides C. and Weber G. (1989). An Expenditure-Based Estimate of Britain’s Black Economy. Journal of Public Economics, vol. 39. pp. 17–32.
  • Tanzi V. (1983). The Underground Economy in the United States: Annual Estimates, 1930–1980. IMF-Staff Papers, vol. 30 (2), pp. 283–305.
Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606