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Shadow Economy and Tax Evasion: A Panel VAR approach. The Case of E.U.27


Author Info

  • Mihai Mutascu

    (West University of Timisoara, Faculty of Economics and Business Administration,Timisoara)

  • Anne-Marie Fleischer

    (West University of Timisoara, Faculty of Economics and Business Administration,Timisoara)


The paper investigates the biunivoque relationship between shadow economy (s) and tax evasion (t), considering a panel data-series, from 1997 to 2005, in the case of European Union 27 (E.U.27) countries. The empirical results show that: (1) A positive 1% impulse in s determines a strong descendent reaction of t on short term (first 2-3 years), becoming “aggressive descendent” on the medium and long term, and (2) A positive 1% impulse in t determines a very low ascendant reaction of s’s level on medium and long term. The main finding reveals that the relationship between shadow economy and tax evasion has different amplitude and signs.

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Bibliographic Info

Article provided by Weissberg Publishing in its journal Economic Research Guardian.

Volume (Year): 1 (2011)
Issue (Month): 1 (September)
Pages: 24-33

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Handle: RePEc:wei:journl:v:1:y:2011:i:1:p:24-33

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Related research

Keywords: Shadow economy; Tax evasion; Effects; Panel VAR;

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