The Shadow Economy and Morals: A Note

Ekkehart Schlicht

from University of Munich, Department of Economics

Abstract: If the established rules are obeyed spontaneously in an economy, this increases economic efficiency since the uncertainties, monitoring costs and incentive problems induced by opportunism can be avoided. Opportunism will be increasedby increasing the incentives for unlawful behaviour, however, and a slight increase in these incentives might cause a cumulative and self-nourishing breakdown of morals. The dangers of the growing shadow economy are louring here.

Keywords: shadow economy; business morality; critical mass; taxation; tax compliance (search for similar items in EconPapers)
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