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Increasing Shadow Economies all over the World - Fiction or Reality?

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Author Info

  • Enste, Dominik

    (affiliation not available)

  • Schneider, Friedrich

    ()
    (University of Linz)

Abstract

Using various methods (currency demand, physical input (electricity) measure, model approach), which are discussed and criticized, estimates about the size of 67 developing, transition and OECD countries are presented. The average size of the shadow economy (in % of GDP) over 1989-93 in developing countries is 39.2%, in transition countries 23.2% and in OECD countries 14.2%. An increasing burden of taxation and social security contributions combined with rising state regulatory activities are the driving forces for the size of the shadow economy. According to some findings, a growing shadow economy has a negative impact on official GDP growth, however, a positive impact of corruption on the size of the shadow economy can be found, i.e. the bigger the corruption, the larger is the shadow economy.

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File URL: http://ftp.iza.org/dp26.pdf
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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 26.

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Length: 68 pages
Date of creation: Dec 1998
Date of revision:
Publication status: published in: Journal of Economic Literature, 2000, 38 (1), 77-114
Handle: RePEc:iza:izadps:dp26

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Related research

Keywords: tax evasion; corruption; shadow economy;

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References

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  1. Adam, M. C. & Ginsburgh, V., 1985. "The effects of irregular markets on macroeconomic policy : Some estimates for belgium," European Economic Review, Elsevier, vol. 29(1), pages 15-33.
  2. Edgar L. Feige, 1986. "A Re-Examination of the "Underground Economy" in the United States: A Comment on Tanzi," IMF Staff Papers, Palgrave Macmillan, vol. 33(4), pages 768-781, December.
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  4. Frey, Bruno S & Pommerehne, Werner W, 1984. "The Hidden Economy: State and Prospects for Measurement," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 30(1), pages 1-23, March.
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  7. Bagachwa, M. S. D. & Naho, A., 1995. "Estimating the second economy in Tanzania," World Development, Elsevier, vol. 23(8), pages 1387-1399, August.
  8. 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.
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  10. Frey, Bruno S & Weck, Hannelore, 1983. "Estimating the Shadow Economy: A 'Naive' Approach," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 23-44, March.
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Citations

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Cited by:
  1. Bruno Frey & Friedrich Schneider, 2000. "Informal and underground economy," Economics working papers 2000-04, Department of Economics, Johannes Kepler University Linz, Austria.
  2. George M. Georgiou, 2007. "Measuring the Size of the Informal Economy: A Critical Review," Working Papers 2007, Central Bank of Cyprus.
  3. Marco G. Ercolani, 2000. "Inflation Tax and the Hidden Economy," Economics Discussion Papers 509, University of Essex, Department of Economics.
  4. Lars P. Feld & Bruno S. Frey, . "Trust Breeds Trust: How Taxpayers are Treated," IEW - Working Papers 098, Institute for Empirical Research in Economics - University of Zurich.
  5. Simon Johnson & Daniel Kaufmann & John McMillan & Christopher Woodruff, 2003. "Why Do Firms Hide? Bribes and Unofficial Activity after Communism," Public Economics 0308004, EconWPA.
  6. Rafael La Porta & Andrei Shleifer, 2008. "The Unofficial Economy and Economic Development," NBER Working Papers 14520, National Bureau of Economic Research, Inc.
  7. Alexandru Adriana Anamaria & Dobre Ion & Ghinararu Catalin, 2009. "Estimating The Size Of Romanian Shadow Economy Using The Currency Demand Approach," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 623-631, May.
  8. Corina - Maria Ene & Andrei Stefanescu, 2011. "Size And Implication Of Underground Economy In Romania - A Mimic Approach," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 8.
  9. Monica Ospina Londo├▒o & Fabiola Saavedra-Caballero, 2013. "Social Assistance and Informality: Examining the link in Colombia," DOCUMENTOS DE TRABAJO CIEF 010933, UNIVERSIDAD EAFIT.

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