Studying the hidden economy requires an operational definition of it. Feige's (1979) definition is “those economic activities that go unreported or are unmeasured by the society's current techniques for monitoring economic activity” (p. 6). Tanzi's (1982) definition of the hidden economy is “gross national product that because of unreporting and/or underreporting is not measured by official statistics” (p. 70). Macafee (1980) offers yet a third definition.

In light of these various definitions, it is not surprising that the various methods that have been employed to estimate the hidden economy often measure different things. Estimations based on the development of the composition of the money stock will not include barter transactions. Analysis performed by the Internal Revenue Service focuses on unreported income that implies tax evasion, whereas the GNP concept of income is broader than taxable income. Nevertheless, the lack of a general and operational definition of the hidden economy should not keep researchers from trying to measure parts of it, bearing in mind that different methods most likely capture different unregistered activities.

We have attempted to measure the hidden economy of Norway in terms of a micro- and a macro-approach. The micro-approach, based on a survey study conducted in September 1980, is rather novel. The macro-study is more traditional as it focuses on the development of the stock of currency.

The micro-approach was solely related to unreported income from work. The main purpose of the survey was to collect data in order to test hypotheses concerning the effects of marginal taxes, penalty charges, probabilities of detection, and demographic factors on the supply of labor in the hidden economy.