IDEAS home Printed from https://ideas.repec.org/p/jku/econwp/2000_04.html
   My bibliography  Save this paper

Informal and underground economy

Author

Abstract

There is a widespread feeling that a substantial and increasing share of activities take place outside the official economy. This holds, in particular, for developing and transition but also for high income economies. Such activities are unrecorded by the system of national income accounting, which has become the accepted standard in all countries of the world. The existence and increase of an underground economy gives rise to three major sets of concerns. The economic and social conditions of individuals, household and countries are evaluated in a biased way if one relies on the official statistics. Thus, the official number of unemployed persons may hide that an (unknown) share of them actually work and receive wage income. As a consequence, the macro economic policies are likely to be too expansionary and social policy too excessive. A second concern is the loss of tax revenue as underground activities escape taxation. A third concern interprets the underground economy as an indicator of an unhealthy state between citizens and government. The taxpayers are dissatisfied with what public services they get for their contributions and seek to restress the balance by evading to the underground economy. It is feared that such reaction makes government unable to finance the public goods necessary for an economy and society. In contrast, opponents of government welcome such a development.

Suggested Citation

  • Bruno Frey & Friedrich Schneider, 2000. "Informal and underground economy," Economics working papers 2000-04, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2000_04
    as

    Download full text from publisher

    File URL: http://www.econ.jku.at/papers/2000/wp0004.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Adam, M. C. & Ginsburgh, V., 1985. "The effects of irregular markets on macroeconomic policy : Some estimates for belgium," European Economic Review, Elsevier, pages 15-33.
    2. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, January.
    3. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, pages 818-860.
    4. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
    5. Enste, Dominik & Schneider, Friedrich, 1998. "Increasing Shadow Economies all over the World - Fiction or Reality?," IZA Discussion Papers 26, Institute for the Study of Labor (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, pages 87-99.
    2. Q M Ahmed & M Haider Hussain, 2008. "Estimating the Black Economy through a Monetary Approach: A Case Study of Pakistan," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 45-60, March.
    3. Benno Torgler & Markus Schaffner & Alison Macintyre, 2007. "Tax Compliance, Tax Morale, and Governance Quality," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0727, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Busato; Francesco & Bruno Chiarini & Vincenzo di Maro, 2005. "Directional Congestion and Regime Switching in a Long Memory Model for Electricity Prices," Economics Working Papers 2005-19, Department of Economics and Business Economics, Aarhus University.
    5. M. Sirgy & Grace Yu & Dong-Jin Lee & Shuqin Wei & Ming-Wei Huang, 2012. "Does Marketing Activity Contribute to a Society’s Well-Being? The Role of Economic Efficiency," Journal of Business Ethics, Springer, pages 91-102.
    6. Gerxhani, Klarita, 2004. "Tax evasion in transition: Outcome of an institutional clash? Testing Feige's conjecture in Albania," European Economic Review, Elsevier, vol. 48(4), pages 729-745, August.
    7. Torgler, Benno & Demir, Ihsan C. & Macintyre, Alison & Schaffner, Markus, 2008. "Causes and Consequences of Tax Morale: An Empirical Investigation," Economic Analysis and Policy, Elsevier, vol. 38(2), pages 313-339, September.
    8. Elijah, Obayelu Abiodun & Uffort, Larry, 2007. "Comparative Analysis of the Relationship Between Poverty and Underground economy in the Highly developed, Transition and Developing Countries," MPRA Paper 2054, University Library of Munich, Germany.
    9. Amihai GLAZER & Stef PROOST, 2008. "Capital-intensive projects induce more effort than labor-intensive projects," Working Papers Department of Economics ces0831, KU Leuven, Faculty of Economics and Business, Department of Economics.
    10. Liliana Harding & Mihai Mutascu, 2016. "Does migration affect tax revenue in Europe?," University of East Anglia School of Economics Working Paper Series 2016-08, School of Economics, University of East Anglia, Norwich, UK..
    11. Aleksandar Stulhofer & Ivan Rimac, 2002. "Opportunism, Institutions and Moral Costs: the Socio-Cultural Dimension of the Underground Economy in Croatia 1995-1999," Occasional paper series 14, Institute of Public Finance.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2000_04. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (René Böheim). General contact details of provider: http://edirc.repec.org/data/vlinzat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.