Estimation Of The Non-observed Economy Of Scale In China

The accuracy of GDP (gross domestic product) has important significance on themeasure of a country’s economic development level, formulation of macro economic andfiscal policy. Non-observation economy which are produced in the national economic and arenot measured production activity due to various reasons, should also be included in the GDP(gross domestic product) of data. But as a result of this part of the economic activities of theconcealment and particularity, accurate calculation and measurement on no-observedeconomic scale become an difficult problem and key point in recent years.Based on the NOE definition of1993SNA under the framework, this paper compared thedomestic and foreign relevant theory and practice. Firstly, this paper summarized theconception and accounting scope of NOE under Chinese economic practice, and thenanalyzed reasons that NOE arise and influencing factors. Secondly, this paper brieflyintroduced the NOE estimation thought of the cash scale model, currency demand model andMIMIC model. The advantages and defects were pointed out through the sensitivity analysison the hypothesis conditions for cash ratio model. Thirdly, this paper points out improvedMultiple Indicators Multiple Causes Model (MIMIC), which combined with the estimateresults of cash scale model, currency demand model and MIMIC. This paper calculates therelative scale of Chinese NOE from1978to2010by improved MIMIC, then combined with2006years of economic census data, calculated the not observation economic absolutequantity and actual GDP. Not only get more reasonable not observation economic scale,improved MIMIC also estimates the path effects of the different factors on not observedeconomic scale. Thus this method provides theoretical guidance for decision makers. Fourthly,according to the relationship between observed economy and non-observed economy and thedefinition of non-observed economy, absolute quantity of NOE and actual GDP have beencalculated. And then, this study investigates the fluctuations influences of NOE on theobserved economy (GDP) and real economy which includes the non-observed economy bytrend elimination method. This study mainly gets following conclusions. According to China’s national accountingsystem, not observation economy will be divided into three categories: illegal production,underground production and other not observation production. In the estimated notobservation economic scale, Guttmann model, Tanzi model, MIMIC model estimation resultsin different degree of problem.The results of improved MIMIC model, combined with2006years of economic census data, seems more suitable and convincing to our economy operationand non observed economy. Relative scale of non-observed economy has positive correlationwith tax revenue accounts for the proportion of GDP positively ratio, and negative correlationwith government expenditure in GDP and the total disposable income. The official GDPprobably underestimates the actual GDP. Non-observed economy has different influence oneconomy fluctuation during the economic cycle rise and decline stage.