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The Nature Of The Underground Economy. Some Evidence From Oecd Countries

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Author Info
Maurizio Bovi (ISAE - Institute for Studies and Economic Analyses)

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Abstract

Economic theory suggests that taxation, regulations, efficiency of the bureaucracy and corruption are among the causes of the underground economy. The association between these variables is investigated by using panel regression techniques. The results show that, for OECD countries in the 1990s, the underground economy was positively correlated mainly with institutional failures and, to a lesser extent, with taxation and market regulations. Reflecting a sustained expansion of their public sectors, many OECD countries have raised the tax burden up to late 1990s and improved their institutions. This has led regulations and taxation, excluding social contributions, to increase their association with the shadow economy in the area.

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Publisher Info
Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 26.

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Length: 24 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:isa:wpaper:26

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Related research
Keywords: Taxation; Corruption; Regulations; Legal system; Underground economy.;

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
    Other versions:
  2. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May. [Downloadable!] (restricted)
  3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September. [Downloadable!] (restricted)
  4. Laura Castellucci & Maurizio Bovi, 1999. "What Do We Know About The Size Of The Underground Economy In Italy Beyond The "Common Wisdom"? Some Empirically Tested Propositions," Departmental Working Papers 120, Tor Vergata University, CEIS. [Downloadable!]
  5. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD, Economics Department. [Downloadable!]
  7. Maria Lacko, 1999. "Do Power Consumption Data Tell the Story? - Electricity Intensity and Hidden Economy in Post-Socialist Countries," Budapest Working Papers on the Labour Market 9902, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
  8. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters, in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc. [Downloadable!]
  9. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1999. "Corruption, public finances, and the unofficial economy," Policy Research Working Paper Series 2169, The World Bank. [Downloadable!]
  10. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303. [Downloadable!] (restricted)
  11. 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)
  12. Huther, Jeff & Shah, Anwar, 2000. "Anti-corruption policies and programs : a framework for evaluation," Policy Research Working Paper Series 2501, The World Bank. [Downloadable!]
  13. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June. [Downloadable!] (restricted)
  14. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Archibald R. M. Ritter, 2004. "Cuba's Underground Economy," Carleton Economic Papers 04-12, Carleton University, Department of Economics, revised 14 Jan 2005. [Downloadable!]
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