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

Lee

Global Economic Review, 2013, vol. 42, issue 3, 251-268

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.

Date: 2013
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DOI: 10.1080/1226508X.2013.833846

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