Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis

Benno Torgler () and Friedrich Schneider ()
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Benno Torgler: Queensland University of Technology

No 2563, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyses how governance or institutional quality and tax morale affect the shadow economy, using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited number of investigations use cross-sectional country data with a relatively small number of observations, and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.

Keywords: shadow economy; tax morale; governance quality; government intervention; corruption (search for similar items in EconPapers)
JEL-codes: D73 D78 H2 H26 O17 O5 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2007-01
New Economics Papers: this item is included in nep-dev and nep-pbe
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Citations: View citations in EconPapers (138)

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Related works:
Working Paper: Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis (2007)
Working Paper: Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis (2007)
Working Paper: Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis (2007)
Working Paper: Shadow economy, tax morale, governance and institutional quality: A panel analysis (2007)
Working Paper: Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis (2007)
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