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The not so dark side of trust: does trust increase the size of the shadow economy?

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  • Johanna D'Hernoncourt
  • Pierre-Guillaume Méon

Abstract

This paper studies the relationship between the size of the shadow economy and generalized trust, on a cross-section of countries, both developed and developing, and finds that it is significantly negative. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate of the shadow economy and the estimation period, and to controlling for endogeneity. It is independent from trust in institutions. We provide evidence that it is mainly present in the sample of developing countries. Latest version, September 2011: http://www.solvay.edu/sites/upload/files/CEB_WorkingPapers/LastUpdate/wp08030.pdf

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/14573/1/wp08030.pdf
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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 08-030.RS.

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Length: 37 p.
Date of creation: Oct 2008
Date of revision:
Publication status: Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)
Handle: RePEc:sol:wpaper:08-030

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Keywords: Shadow economy; informal sector; trust.;

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Citations

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Cited by:
  1. Dreher, Axel & Schneider, Friedrich, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," IZA Discussion Papers 1936, Institute for the Study of Labor (IZA).
  2. Heinemann, Friedrich & Osterloh, Steffen & Kalb, Alexander, 2013. "Sovereign risk premia: The link between fiscal rules and stability culture," ZEW Discussion Papers 13-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Buetzer, Sascha & Jordan, Christina & Stracca, Livio, 2013. "Macroeconomic imbalances: a question of trust?," Working Paper Series 1584, European Central Bank.
  4. Gaetano Lisi & Maurizio Pugno, 2010. "Entrepreneurship and the Hidden Economy: An Extended Matching Model," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 587-605.
  5. Wahl, Fabian, 2012. "Why it matters what people think: Beliefs, legal origins and the deep roots of trust," FZID Discussion Papers 52-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  6. Tausch, Arno & Heshmati, Almas, 2014. "Testing an EU-Candidate's Place on the Maps of Global Economic, Political and Social Values: The Case of Turkey," IZA Discussion Papers 8163, Institute for the Study of Labor (IZA).

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