The Shadow Economy and Corruption as Development Impediments

Almas Heshmati ()

A chapter in Economic Integration, Currency Union, and Sustainable and Inclusive Growth in East Africa, 2016, pp 115-133 from Springer

Abstract: Abstract Shadow economic activity has been on the rise leading to many problems for society, the state and also when it comes to trust in its organizations. The shadow economy has a significant share of the overall economy and captures all the activities beyond those measured by official activities. The rise of the shadow economy around the world is attributed to the stronger presence of government activity, increase in tax rates and taxpayer firms and households’ desire to escape taxes and regulatory restrictions. This paper is a review of recent studies investigating various theoretical and empirical aspects of activities in the shadow economy and the measurement and development of the shadow economy across developed, developing and transition economies. It discusses a number of areas related to the shadow economy and their relationship with public performance and economic growth. The review leads to the identification of several indicators with negative or positive association with the size of the shadow economy and its causal effects.

Keywords: Shadow economy; Tax morale; Institutional quality; Corruption; Economic freedom; Economic growth; Effective democracy; Natural resources; Political culture (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:aaechp:978-3-319-30432-8_7

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DOI: 10.1007/978-3-319-30432-8_7

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