Increasing Shadow Economies all over the World - Fiction or Reality?

Dominik Enste and Friedrich Schneider ()

No 26, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using various methods (currency demand, physical input (electricity) measure, model approach), which are discussed and criticized, estimates about the size of 67 developing, transition and OECD countries are presented. The average size of the shadow economy (in % of GDP) over 1989-93 in developing countries is 39.2%, in transition countries 23.2% and in OECD countries 14.2%. An increasing burden of taxation and social security contributions combined with rising state regulatory activities are the driving forces for the size of the shadow economy. According to some findings, a growing shadow economy has a negative impact on official GDP growth, however, a positive impact of corruption on the size of the shadow economy can be found, i.e. the bigger the corruption, the larger is the shadow economy.

Keywords: tax evasion; corruption; shadow economy (search for similar items in EconPapers)
JEL-codes: D78 H2 H26 O17 O5 (search for similar items in EconPapers)
Pages: 68 pages
Date: 1998-12
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (28)

Published - published in: Journal of Economic Literature, 2000, 38 (1), 77-114

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