International Tax and Public Finance

, Volume 19, Issue 1, pp 139–171 | Cite as

Shadow economies around the world: novel insights, accepted knowledge, and new estimates

Article

Abstract

This paper is a first attempt to study the impact of enforcement on the shadow economy. Using a MIMIC model, we find that a higher share of sub-national government employment and the aspiration of public employees to follow rules significantly deter shadow economic activities. Our results also confirm previous findings: Increased burdens of taxation and regulation as well as the state of the “official” economy are important determinants of the shadow economy. The estimated weighted average informality in 162 countries around the world, including developing, Eastern European, Central Asian, and high-income OECD countries, is 17.1% of “official” GDP.

Keywords

Shadow economies Quality of institutions Enforcement MIMIC Model 

JEL Classification

O17 O5 D78 H11 H26 

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Utrecht School of EconomicsUtrecht UniversityUtrechtThe Netherlands
  2. 2.Andrew Young School of Policy StudiesGeorgia State UniversityAtlantaUSA
  3. 3.Faculty of Business and EconomicsTechnische Unversität DresdenDresdenGermany
  4. 4.Department of EconomicsJohannes Kepler University of LinzLinzAustria

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