Corruption and the Shadow Economy: A Structural Equation Model Approach

41 Pages Posted: 26 May 2009

See all articles by Andreas Buehn

Andreas Buehn

University of Cooperative Education Bautzen

Friedrich Schneider

Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Abstract

The relationship between corruption and the shadow economy is not clear. Theoretically, they either substitute or complement each other - exhibiting either a negative or positive relationship. This paper - using a structural equation model with two latent variables - extracts information on various dimensions of corruption and the shadow economy to contribute to the debate on their relationship. It presents empirical evidence of a positive relationship between the shadow economy and corruption. The results show that the shadow economy influences corruption more than corruption influences the shadow economy.

Keywords: shadow economy, corruption, SEM models

JEL Classification: O17, O5, D78, H11, H26

Suggested Citation

Buehn, Andreas and Schneider, Friedrich G., Corruption and the Shadow Economy: A Structural Equation Model Approach. IZA Discussion Paper No. 4182, Available at SSRN: https://ssrn.com/abstract=1409286

Andreas Buehn (Contact Author)

University of Cooperative Education Bautzen ( email )

Loebauer Strasse 1
Bautzen, 02625
Germany

Friedrich G. Schneider

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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