Fiscal illusion and the shadow economy: Two sides of the same coin?
AbstractThis paper presents an empirical analysis of the relationship between fiscal illusion and the shadow economy for 104 countries over the period 1989–2009. We argue that both unobservable phenomena are closely linked to each other, as the creation of a fiscal illusion may be helpful if governments want to control shadow economic activities. Using a MIMIC model with two latent variables we confirm previous findings on the driving forces of the shadow economy and identify the main determinants and indicators of fiscal. Most importantly, we find that fiscal illusion negatively affects the shadow economy: Concealing the real tax burden through fiscal illusion potentially contributes to the government’s efforts to repress shadow economic activities.
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Bibliographic InfoPaper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2013-21.
Length: 29 pages
Date of creation: Dec 2013
Date of revision:
Fiscal illusion; shadow economy; MIMIC model; latent variables; tax burden; tax complexity;
Other versions of this item:
- Buehn, Andreas & Dell'Anno, Roberto & Schneider, Friedrich, 2012. "Fiscal illusion and the shadow economy: Two sides of the same coin?," MPRA Paper 42531, University Library of Munich, Germany.
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
- N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-06 (All new papers)
- NEP-IUE-2013-12-06 (Informal & Underground Economics)
- NEP-MAC-2013-12-06 (Macroeconomics)
- NEP-PBE-2013-12-06 (Public Economics)
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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