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The changing nature of the OECD shadow economy

  • Maurizio Bovi

    ()

  • Roberto Dell’Anno

    ()

As recently suggested, the shadow economy and its determinants (taxation, regulations, corruption, etc.) are linked such that just two stable equilibria are possible. In the good one there is a small hidden sector, large fiscal revenues and honest/appreciated institutions. The other (bad) equilibrium is quite the opposite. Our paper examines the links between these variables in relatively uncorrupt systems. Unlike the mainstream literature, we suggest that a continuum of SE equilibrium rates can emerge and that taxation and underground activities can be positively correlated. Empirical evidence for OECD countries broadly supports the model.

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File URL: http://hdl.handle.net/10.1007/s00191-009-0138-8
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 20 (2010)
Issue (Month): 1 (January)
Pages: 19-48

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Handle: RePEc:spr:joevec:v:20:y:2010:i:1:p:19-48
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  14. 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.
  15. Vito Tanzi, 1998. "Corruption Around the World; Causes, Consequences, Scope, and Cures," IMF Working Papers 98/63, International Monetary Fund.
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