Tax evasion, education and shadow economy

Salvatore Ciucci ()
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Salvatore Ciucci: Università degli studi della Campania “Luigi Vanvitelli”

Economic Change and Restructuring, 2024, vol. 57, issue 4, No 14, 16 pages

Abstract: Abstract The aim of the paper is to evaluate the influence of education on tax evasion. This study proposes a theoretical model, in which an agent can choose to allocate his labor effort between two production technologies. Higher levels of education lead to more skilled and specialized workers, and the tax authority can observe the use of advanced tools and equipment. The main result is that an increase in the general level of education leads to a labor effort substitution effect, showing that higher education can reduce tax evasion and the size of the shadow economy. Both static and dynamic estimation techniques are employed to test the theoretical findings, using a sample of 133 countries, over the period 2001–2020. The empirical analysis confirms the significant negative association between education and shadow economy.

Keywords: Education; Tax evasion; Shadow economy; Labor technology (search for similar items in EconPapers)
JEL-codes: D10 H26 I20 I23 J20 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10644-024-09732-8

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