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How Does Social Capital Reduce the Size of the Shadow Economy?

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  • Lee

Abstract

This paper investigates the missing link between multi-dimensional components of social capital and the size of the shadow economy, an association generally considered to be ambiguous. A simple agency model shows that social capital and the shadow economy are connected through a mechanism reducing the perceived level of corruption. Using a sample of 65 countries, 1999 to 2007, the paper finds that social trust, social norms (e.g. tax morale), and a broad index of social capital are robust, negative determinants of the shadow economy.

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  • Lee, 2013. "How Does Social Capital Reduce the Size of the Shadow Economy?," Global Economic Review, Taylor & Francis Journals, vol. 42(3), pages 251-268, September.
    • Handle: RePEc:taf:glecrv:v:42:y:2013:i:3:p:251-268
    DOI: 10.1080/1226508X.2013.833846
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    Cited by:

    1. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.

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