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Corruption and the shadow economy: An empirical analysis

Axel Dreher () and Friedrich Schneider ()

No 2006-03, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a crosssection of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.

Keywords: corruption; shadow economy; regulation; tax burden (search for similar items in EconPapers)
JEL-codes: D73 H26 O17 O5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-pbe, nep-pol and nep-reg
Date: 2006-01
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http://www.econ.jku.at/papers/2006/wp0603.pdf (application/pdf)

Related works:
Journal Article: Corruption and the shadow economy: an empirical analysis (2010) Downloads
Working Paper: Corruption and the Shadow Economy: An Empirical Analysis (2006) Downloads
Working Paper: Corruption and the Shadow Economy: An Empirical Analysis (2006) Downloads
Working Paper: Corruption and the Shadow Economy: An Empirical Analysis (2006) Downloads
Working Paper: Corruption and the Shadow Economy: An Empirical Analysis (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2006_03

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