Measuring the Non-observed Economy in a Transition Economy: The Case of Bosnia–Herzegovina ROBERTO DELL’ANNO 1 & MARJE PIIRISILD 2 1 Department of Economics, Mathematics and Statistics, University of Foggia, Largo Papa Giovanni Paolo II 1, Foggia 71100, Italy. E-mail: r.dellanno@unifg.it 2 State Budget Department, Ministry of Finance, Suur-Ameerika 1, Tallinn 15006, Estonia. E-mail: marje.piirisild@fin.ee In this paper the Organization for Economic Cooperation Development (OECD) approach (adjusted) is applied to estimate the size of the non-observed economy (NOE) in Bosnia and Herzegovina for the year 2001. The method proposed attempts to identify the structure of the NOE according to the reasons behind the unrecorded value added (statistical, illegal and economic). The NOE was estimated for each of the Bosnian entities separately according to sector of activity. A definition of the shadow economy is proposed based on SNA93. A comparison with alternative estimates of shadow economies in Central and Eastern European countries is provided. Comparative Economic Studies (2007) 49, 609–631. doi:10.1057/palgrave.ces.8100211 Keywords: Bosnia and Herzegovina, non-observed economy, shadow economy, unofficial economy JEL Classifications: P240, C820 INTRODUCTION Many studies and various techniques have been developed to assess the size of unofficial economic activities though, unluckily for those countries that are common to multiple studies, there is clear evidence of their divergent outcomes (Fleming et al., 2000). Schneider and Enste (2000) assert that no method is exempt from criticism and further research is necessary to overcome several limitations. According to Eilat and Zinnes (2002), while numerous methods have been Comparative Economic Studies, 2007, 49, (609–631) r 2007 ACES. All rights reserved. 0888-7233/07 $30.00 www.palgrave-journals.com/ces