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Shadow Economies and Corruption All Over the World: What Do We Really Know?

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Author Info
Friedrich Schneider () (Johannes Kepler University of Linz and IZA Bonn)

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Abstract

Estimations of the size and development of the shadow economy for 145 countries, including developing, transition and highly developed OECD economies over the period 1999 to 2003 are presented. The average size of the shadow economy (as a percent of “official” GDP) in 2002/03 in 96 developing countries is 38.7%, in 25 transition countries 40.1%, in 21 OECD countries 16.3% and in 3 Communist countries 22.3%. An increased burden of taxation and social security contributions, combined with a labor market regulation are the driving forces of the shadow economy. Furthermore, the results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. Finally, the various estimation methods are discussed and critically evaluated.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2315.

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Length: 67 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2315

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Related research
Keywords: shadow economy of 145 countries; tax burden; tax morale; quality of state institutions; regulation; DYMIMIC and other estimation methods;

Other versions of this item:

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
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

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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.:
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  8. 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:
  9. Edgar L. Feige, 2005. "A Re-Examination of the 'Underground Economy' in the United States; A Comment on Tanzi," Macroeconomics 0501021, EconWPA. [Downloadable!]
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    Other versions:
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  25. Tilman Brück & John P. Haisken-De New & Klaus F. Zimmermann, 2006. "Creating low skilled jobs by subsidizing market-contracted household work," Applied Economics, Taylor and Francis Journals, vol. 38(8), pages 899-911, May. [Downloadable!] (restricted)
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Full references

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. Lipatov, Vilen, 2005. "Corporate Tax Evasion: the Case for Specialists," MPRA Paper 14181, University Library of Munich, Germany, revised Mar 2009. [Downloadable!]
  2. Eugene Amromin & Sujit Chakravorti, 2007. "Debit card and cash usage: a cross-country analysis," Working Paper Series WP-07-04, Federal Reserve Bank of Chicago. [Downloadable!]
  3. Era Dabla-Norris & Gabriela Inchauste, 2007. "Informality and Regulations: What Drives Firm Growth?," IMF Working Papers 07/112, International Monetary Fund. [Downloadable!]
  4. Junko Koeda & Era Dabla-Norris, 2008. "Informality and Bank Credit: Evidence from Firm-Level Data," IMF Working Papers 08/94, International Monetary Fund. [Downloadable!]
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