Increasing Shadow Economies All Over the World - Fiction or Reality

Institute for the Study of Labor Discussion Paper No. 26

67 Pages Posted: 5 Aug 1999

See all articles by Friedrich Schneider

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)

Dominik Enste

University of Cologne - Department of Economics

Date Written: December 1998

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.

JEL Classification: O17, O5, D78, H2, H26

Suggested Citation

Schneider, Friedrich G. and Enste, Dominik, Increasing Shadow Economies All Over the World - Fiction or Reality (December 1998). Institute for the Study of Labor Discussion Paper No. 26, Available at SSRN: https://ssrn.com/abstract=166559 or http://dx.doi.org/10.2139/ssrn.166559

Friedrich G. Schneider (Contact Author)

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

Dominik Enste

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

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