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In the Shadow of the State – The Informal Economy and Informal Economy Labor Force

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  • Friedrich Schneider

    () (Johannes Kepler University of Linz)

Abstract

In this paper, the main focus lies on the informal economy and on work in the shadow. The most influential factors on the informal economy are tax policies and state regulation. The size of the informal economy was decreasing over the period 1999 to 2007, from 34.0% to 31.2% for 161 countries (unweighted average). Furthermore, economic opportunities, taxes and regulations, the general situation on the labor market, and unemployment are crucial for an understanding of the dynamics of the shadow labor force. In contrast with the decrease of the informal economy (value added figures), the informal economy labor force increased for most countries over the period 1999 to 2007.

Suggested Citation

  • Friedrich Schneider, 2014. "In the Shadow of the State – The Informal Economy and Informal Economy Labor Force," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 227-248, December.
  • Handle: RePEc:cmn:journl:y:2014:i:4:p:227-248
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    References listed on IDEAS

    as
    1. Kirchler, Erich & Maciejovsky, Boris & Schneider, Friedrich, 2003. "Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences matter?," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 535-553, August.
    2. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
    3. Andreas Buehn & Friedrich Schneider, 2012. "Shadow economies around the world: novel insights, accepted knowledge, and new estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 139-171, February.
    4. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    5. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    6. Schneider Friedrich, 2010. "The Influence of Public Institutions on the Shadow Economy: An Empirical Investigation for OECD Countries," Review of Law & Economics, De Gruyter, vol. 6(3), pages 441-468, December.
    7. van Eck, Robert & Kazemier, Brugt, 1988. "Features of the Hidden Economy in the Netherlands," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(3), pages 251-273, September.
    8. Colin Williams & Jan Windebank, 2001. "Reconceptualising Paid Informal Exchange: Some Lessons from English Cities," Environment and Planning A, , vol. 33(1), pages 121-140, January.
    9. Giles, David E A, 1999. "Measuring the Hidden Economy: Implications for Econometric Modelling," Economic Journal, Royal Economic Society, vol. 109(456), pages 370-380, June.
    10. em. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
    11. Tilman Bruck & John P. Haisken-De New & Klaus Zimmermann, 2006. "Creating low skilled jobs by subsidizing market-contracted household work," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 899-911.
    12. Bhattacharyya, Dilip K, 1999. "On the Economic Rationale of Estimating the Hidden Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 348-359, June.
    13. Helmut Herwartz & Egle Tafenau & Friedrich Schneider, 2015. "One Share Fits All? Regional Variations in the Extent of the Shadow Economy in Europe," Regional Studies, Taylor & Francis Journals, vol. 49(9), pages 1575-1587, September.
    14. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 338-347, June.
    15. Enrico Marcelli, 2004. "Unauthorized Mexican Immigration, Day Labour and other Lower-wage Informal Employment in California," Regional Studies, Taylor & Francis Journals, vol. 38(1), pages 1-13.
    16. Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2009. "How do institutions affect corruption and the shadow economy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(6), pages 773-796, December.
    17. Torgler, Benno & Schneider, Friedrich, 2009. "The impact of tax morale and institutional quality on the shadow economy," Journal of Economic Psychology, Elsevier, vol. 30(2), pages 228-245, April.
    18. Stefan D. HAIGNER & Stefan JENEWEIN & Friedrich SCHNEIDER & Florian WAKOLBINGER, 2013. "Driving forces of informal labour supply and demand in Germany," International Labour Review, International Labour Organization, vol. 152(3-4), pages 507-524, December.
    19. Bruno S. Frey & Werner W. Pommerehne, 1984. "The Hidden Economy: State And Prospects For Measurement1," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 30(1), pages 1-23, March.
    20. David Giles, 1999. "The rise and fall of the New Zealand underground economy: are the responses symmetric?," Applied Economics Letters, Taylor & Francis Journals, vol. 6(3), pages 185-189.
    21. Egle Tafenau & Helmut Herwartz & Friedrich Schneider, 2010. "Regional Estimates of the Shadow Economy in Europe," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 629-636.
    22. repec:bla:revinw:v:34:y:1988:i:3:p:251-273 is not listed on IDEAS
    23. Schneider,Friedrich & Enste,Dominik H., 2016. "The Shadow Economy," Cambridge Books, Cambridge University Press, number 9781316600894.
    24. Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-136.
    25. Désirée Teobaldelli, 2011. "Federalism and the shadow economy," Public Choice, Springer, vol. 146(3), pages 269-289, March.
    26. Lars P. Feld & Friedrich Schneider, 2010. "Survey on the Shadow Economy and Undeclared Earnings in OECD Countries," German Economic Review, Verein für Socialpolitik, vol. 11, pages 109-149, May.
    27. Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, number 9780521876742.
    28. Friedrich Schneider, 2005. "Shadow Economies of 145 Countries all over the World: What Do We Really Know?," CREMA Working Paper Series 2005-13, Center for Research in Economics, Management and the Arts (CREMA).
    29. Kastlunger, Barbara & Kirchler, Erich & Mittone, Luigi & Pitters, Julia, 2009. "Sequences of audits, tax compliance, and taxpaying strategies," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 405-418, June.
    30. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    31. Schneider, Friedrich, 1986. " Estimating the Size of the Danish Shadow Economy Using the Currency Demand Approach: An Attempt," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(4), pages 643-668.
    32. Arne Jon Isachsen & Steiner Strøm, 1985. "The Size And Growth Of The Hidden Economy In Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(1), pages 21-38, March.
    33. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    34. Torgler, Benno, 2002. " Speaking to Theorists and Searching for Facts: Tax Morale and Tax Compliance in Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 657-683, December.
    35. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    36. em. Friedrich Schneider & Désirée Teobaldelli, 2012. "Beyond the Veil of Ignorance: The Influence of Direct Democracy on the Shadow Economy," CESifo Working Paper Series 3749, CESifo Group Munich.
    37. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
    38. Trevor Breusch, 2005. "Estimating the Underground Economy using MIMIC Models," Econometrics 0507003, University Library of Munich, Germany, revised 15 Dec 2005.
    39. Andreas Buehn & Alexander Karmann & Friedrich Schneider, 2009. "Shadow Economy and Do-it-Yourself Activities: The German Case," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(4), pages 701-722, December.
    40. Merz, Joachim & Wolff, Klaus G, 1993. "The Shadow Economy: Illicit Work and Household Production: A Microanalysis of West Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 177-194, June.
    41. Friedrich Schneider (ed.), 2011. "Handbook on the Shadow Economy," Books, Edward Elgar Publishing, number 13432.
    42. David KUCERA & Leanne RONCOLATO, 2008. "Informal employment: Two contested policy issues," International Labour Review, International Labour Organization, vol. 147(4), pages 321-348, December.
    43. repec:hrv:faseco:30728045 is not listed on IDEAS
    44. Schneider, Friedrich, 1994. "Can the Shadow Economy Be Reduced through Major Tax Reforms? An Empirical Investigation for Austria," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 137-152.
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    Cited by:

    1. Petra Koudelkova & Wadim Strielkowski & Denisa Hejlova, 2015. "Corruption and System Change in the Czech Republic: Firm-level Evidence," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 25-46, March.
    2. Zimčík Petr, 2016. "Economic Growth and Budget Constraints: EU Countries Panel Data Analysis," Review of Economic Perspectives, Sciendo, vol. 16(2), pages 87-101, June.

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