Introduction:

My presentation at the Sino–German Symposium on Human Resources, Labour Market and Social Insurance at the Wuhan University in April 2009 dealt with three subjects:

1. definition of the shadow economy (henceforth SE for short), in particular of underground or "black" activities as a part of the SE and theories on the causes and consequences of the shadow or in particular "black economy" (BE for short);

2. methods of estimating the size of the SE with a focus on the BE,1 and 3. empirical results of such estimates and some controversies about their plausibility.

In what follows the focus is on the second topic and an attempt is made to review the most frequently used and discussed methods of measuring the net product (value added) of the SE. It is quite common to express this so called "size" of the SE in terms of a percentage of the official gross domestic product (GDP). However, this procedure is justifiable only for illustrative purposes because SE–production is only partly, not totally1 excluded from the official GDP.

It will be shown in Part 2 of the paper that the "state of the art methods of measuring the SE are all but satisfactory, giving rise to some lasting methodological controversies. Emphasis is laid in particular on the so called monetary approaches. In Part 3 we comment on some statistical estimates of the size of the SE in various countries and over the course of time. Thanks to the great number of published estimates for more than 70 countries based on various methods we are also in a position to discuss the plausibility of the reported estimates.