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The Shadow Economy in Germany - A Blessing or a Curse for the Official Economy?

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Author Info
Schneider, Friedrich () (Johannes Kepler University Linz (Austria))

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Abstract

This article provides an estimation of the size and development of the shadow economy of Germany, using various estimation procedures. The shadow economy is defined as market-bound production of goods and services which escape detection in the official estimates of GDP. An increased burden of taxation and social security payments, combined with intensive labour market regulation, insufficient quality of state institutions and low tax morale are the driving forces for the shadow economy. Moreover, the results of recent surveys for Germany demonstrate that the readiness to undertake illicit employment as well as its acceptance is high in Germany and other countries. Finally, conclusions are made about the effect of the shadow economy on the official one and incentive-oriented policy means are presented, so that the ‘black’ value added can be transformed into the official value added.

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Publisher Info
Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

Volume (Year): 38 (2008)
Issue (Month): 1 (March)
Pages: 89-111
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Handle: RePEc:eap:articl:v:38:y:2008:i:1:p:89-111

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Related research
Keywords: shadow economy; inofficial economy; black market;

Find related papers by JEL classification:
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

References listed on IDEAS
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  1. Schneider, Friedrich, 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1(9), pages 1-66. [Downloadable!]
  2. Benno Torgler & Friedrich Schneider, 2005. "Attitudes Towards Paying Taxes in Austria: An Empirical Analysis," Empirica, Springer, vol. 32(2), pages 231-250, 06. [Downloadable!] (restricted)
    Other versions:
  3. Friedrich Schneider, 2000. "The Increase of the size of the shadow economy of 18 OECD countries: Some preliminary explanations," Economics working papers 2000-08, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
    Other versions:
  4. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June. [Downloadable!] (restricted)
  5. Schneider, Friedrich, 1986. " Estimating the Size of the Danish Shadow Economy Using the Currency Demand Approach: An Attempt," Scandinavian Journal of Economics, Blackwell Publishing, vol. 88(4), pages 643-68.
  6. Giles, David E A, 1999. "The Rise and Fall of the New Zealand Underground Economy: Are the Responses Symmetric?," Applied Economics Letters, Taylor and Francis Journals, vol. 6(3), pages 185-89, March. [Downloadable!] (restricted)
  7. Michael Pickhardt & Jordi Sardà Pons, 2006. "Size and scope of the underground economy in Germany," Applied Economics, Taylor and Francis Journals, vol. 38(14), pages 1707-1713, August. [Downloadable!] (restricted)
  8. Friedrich Schneider, 2000. "Schattenwirtschaft - Tatbestand, Ursachen, Auswirkungen," Economics working papers 2000-07, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
  9. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September. [Downloadable!] (restricted)
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  10. Torgler, Benno, 2002. " Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments," Journal of Economic Surveys, Blackwell Publishing, vol. 16(5), pages 657-83, December. [Downloadable!] (restricted)
  11. Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA. [Downloadable!]
  12. Dell'Anno, Roberto, . "Estimating the Shadow Economy in Italy: a Structural Equation Approach," Economics Working Papers 2003-7, School of Economics and Management, University of Aarhus. [Downloadable!]
  13. Annette Mummert & Friedrich Schneider, 2001. "The German Shadow Economy: Parted in a United Germany?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 286-, July.
  14. Halla, Martin & Schneider, Friedrich, 2008. "Taxes and Benefits: Two Distinct Options to Cheat on the State?," IZA Discussion Papers 3536, Institute for the Study of Labor (IZA). [Downloadable!]
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  15. Kirchler, Erich & Maciejovsky, Boris & Schneider, Friedrich, 2003. "Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences matter?," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 535-553, August. [Downloadable!] (restricted)
    Other versions:
  16. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December. [Downloadable!] (restricted)
  17. Lars Feld & Bruno Frey, 2000. "Trust Breeds Trust: How Taxpayers are Treated," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  18. Friedrich Schneider & Christopher Bajada, 2003. "The Size and Development of the Shadow Economies in the Asia-Pacific," Economics working papers 2003-01, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
  19. Frey, Bruno S & Pommerehne, Werner W, 1984. "The Hidden Economy: State and Prospects for Measurement," Review of Income and Wealth, Blackwell Publishing, vol. 30(1), pages 1-23, March.
  20. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June. [Downloadable!] (restricted)
  21. Benno Torgler & Friedrich Schneider, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  22. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages F370-80, June. [Downloadable!] (restricted)
    Other versions:
  23. Lars P. Feld & Bruno S. Frey, 2006. "Tax Compliance as the Result of a Psychological Tax Contract: The Role of Incentives and Responsive Regulation," CREMA Working Paper Series 2006-10, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
    Other versions:
  24. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
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