An Estimate of Self-Employment Income Underreporting in Finland

This paper estimates the extent of income underreporting by the self-employed in Finland using the expenditure based approach developed by Pissarides & Weber (1989). Household spending data are for the years 1994 to 1996. Depending on how a self-employed household is defined, the results suggest that self-employment income in Finland is underreported by some 16-40%. Since income for the self-employed is about 8% of all incomes in Finland, the size of this part of the black economy in Finland is estimated to be about 1.3-3.2% of GDP.