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A recent paper which has gathered significant attention estimates a 45% tariff equivalent of intra-EU border costs. This column argues that this estimate is likely too high and depends on the particular dataset used and specific estimation choices.
No, the EU does not impose a 45% tariff on itselfProfessor of International Economics IMD Business School, Lausanne; VoxEU Founder & Editor-in-Chief VoxEU
Economists have long struggled to measure the informal economy, despite its significant role in global economic activity. Previous methods have relied on indirect proxies such as cash circulation or electricity usage, or on inferences based on highly structured macroeconomic models. This column by Francesco Pappadà and Kenneth Rogoff introduces a new, algorithmic and easily updateable approach to estimating informal activity in Europe, utilising VAT data and consumption surveys. While the approach works particularly well for Europe, it can in principle can be extended to other countries where value added taxes are a major source of revenue.