Estimations of the shadow economies for 145 countries, including developing, transition and highly developed OECD economies over 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 28 transition countries 40.1% and in 21 OECD countries 16.3%. An increased burden of taxation and social security contributions, combined with a labour 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 Kiel Institute for the World Economy in its series Economics Discussion Papers with number
2007-9.
Find related papers by JEL classification: D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H2 - Public Economics - - Taxation, Subsidies, and Revenue H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion 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
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