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The Nature Of The Underground Economy. Some Evidence From Oecd Countries

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  • Maurizio Bovi

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

Economic theory suggests that taxation, regulations, efficiency of the bureaucracy and corruption are among the causes of the underground economy. The association between these variables is investigated by using panel regression techniques. The results show that, for OECD countries in the 1990s, the underground economy was positively correlated mainly with institutional failures and, to a lesser extent, with taxation and market regulations. Reflecting a sustained expansion of their public sectors, many OECD countries have raised the tax burden up to late 1990s and improved their institutions. This has led regulations and taxation, excluding social contributions, to increase their association with the shadow economy in the area.

Suggested Citation

  • Maurizio Bovi, 2003. "The Nature Of The Underground Economy. Some Evidence From Oecd Countries," ISAE Working Papers 26, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    • Handle: RePEc:isa:wpaper:26
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    Cited by:

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    2. Aristidis Bitzenis & Vasileios Vlachos & Friedrich Schneider, 2016. "An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(1), pages 165-196, January.
    3. World Bank, 2008. "Reducing Undeclared Employment in Hungary : Synthesis Report of The World Bank Study," World Bank Publications - Reports 8115, The World Bank Group.
    4. Araniyar C. Isukul & John J. Chizea, 2015. "Environmental Factors Influencing Corporate Governance," SAGE Open, , vol. 5(2), pages 21582440155, May.
    5. Mara, Eugenia Ramona, 2021. "Drivers of the shadow economy in European Union welfare states: A panel data analysis," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 309-325.
    6. Judge, William Q. & McNatt, D. Brian & Xu, Weichu, 2011. "The antecedents and effects of national corruption: A meta-analysis," Journal of World Business, Elsevier, vol. 46(1), pages 93-103, January.
    7. Luigi, Bernardi, 2003. "Tax systems and tax reforms in Europe: Rationale and open issue for more radical reforms," MPRA Paper 18041, University Library of Munich, Germany.
    8. Yilmaz Bayar & Omer Faruk Ozturk, 2016. "Financial Development and Shadow Economy in European Union Transition Economies," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(2 (Summer), pages 157-173.
    9. Byung‐Yeon Kim, 2005. "Poverty and informal economy participation," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 163-185, January.
    10. Belal Fallah, 2014. "The Pros and Cons of Formalizing Informal MSES in the Palestinian Economy," Working Papers 893, Economic Research Forum, revised Dec 2014.
    11. Soldatos, Gerasimos T., 2015. "An Anti-Austerity Policy Recipe against Debt Accumulation in the Presence of Hidden Economy," MPRA Paper 69911, University Library of Munich, Germany.
    12. David Howden, 2011. "Europe’s Unemployment Crisis: Some Hidden Relief?," Chapters, in: David Howden (ed.), Institutions in Crisis, chapter 4, Edward Elgar Publishing.

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    More about this item

    Keywords

    Taxation; Corruption; Regulations; Legal system; Underground economy.;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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