Estimating the Size of the Danish Shadow Economy Using the Currency Demand Approach: An Attempt.

The currency demand approach pro vides some insight into the size anddevelopment of the shadow economy in Denmar k. Currency demand is statistically affected by tax rates. The difference in cur rency demand is calculated by comparing the actual tax burden over time to the l owest tax burden in the period 1952-82. The shadow economy grewsteadily to 10 p ercent (of GNP) in 1977 and then fluctuated between 7 and 10 percent (of GNP) fo r the period 1978-82. The calculated size fits nicely with the results obtained using the same method for Norway, Sweden, and West Germany. Copyright 1986 by The editors of the Scandinavian Journal of Economics.