Dodging the Grabbing Hand: The Determinants of Unofficial Activity in 69
AbstractAcross 69 countries, higher tax rates are associated with less unofficial activity as a percent of GDP but corruption is associated with more unofficial activity. Entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption. Dodging the "Grabbing Hand" in this way reduces tax revenues as a percent of both official and total GDP. As a result, corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates.
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Bibliographic InfoPaper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199921.
Date of creation: 12 Oct 1999
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corporate governance; corruption; tax rates; unofficial activity;
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