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Shadow economies and corruption all over the world: what do we really know?

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  • Schneider, Friedrich G.

Abstract

Estimations of the shadow economies for 145 countries, including developing, transition and highly developed OECD economies over 1999 to 2003 are presented. The average size of the shadow economy (as a percent of "official" GDP) in 2002/03 in 96 developing countries is 38.7%, in 28 transition countries 40.1% and in 21 OECD countries 16.3%. An increased burden of taxation and social security contributions, combined with a labour market regulation are the driving forces of the shadow economy. Furthermore, the results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. Finally, the various estimation methods are discussed and critically evaluated.

Suggested Citation

  • Schneider, Friedrich G., 2007. "Shadow economies and corruption all over the world: what do we really know?," Economics Discussion Papers 2007-9, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwedp:5523
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    More about this item

    Keywords

    shadow economy of 145 countries; tax burden; tax moral; quality of state institutions; regulation; DYMIMIC and other estimation methods;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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