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

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  • Maurizio Bovi

    (ISAE - Institute for Studies and Economic Analyses)

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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File URL: http://lipari.istat.it/digibib/Working_Papers/wpbovi26.pdf
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Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (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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Keywords: Taxation; Corruption; Regulations; Legal system; Underground economy.;

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References

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  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.
  2. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
  3. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, July.
  4. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  5. 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.
  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 Publishing.
  7. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  8. 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.
  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.
  10. Huther, Jeff & Shah, Anwar, 2000. "Anti-corruption policies and programs : a framework for evaluation," Policy Research Working Paper Series 2501, The World Bank.
  11. 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, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  12. 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.
  13. 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.
  14. 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.
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Cited by:
  1. World Bank, 2008. "Reducing Undeclared Employment in Hungary : Synthesis Report of The World Bank Study," World Bank Other Operational Studies 8115, The World Bank.
  2. Judge, William Q. & McNatt, D. Brian & Xu, Weichu, 2011. "The antecedents and effects of national corruption: A meta-analysis," Journal of World Business, Elsevier, vol. 46(1), pages 93-103, January.
  3. Luigi, Bernardi, 2003. "Tax systems and tax reforms in Europe: Rationale and open issue for more radical reforms," MPRA Paper 18041, University Library of Munich, Germany.

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