Shadow Economies in Highly Developed OECD Countries: What are the Driving Forces?

34 Pages Posted: 13 Oct 2012

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)

Andreas Buehn

University of Cooperative Education Bautzen

Date Written: October 13, 2012

Abstract

In this paper the main focus lies on 'driving forces' of the development and size of the shadow economy in highly developed 39 OECD countries. The influential factors on the shadow economy are tax policies and state regulation, which, if they rise, increase the shadow economy, but also other factors like economic ones (unemployment) are considered, too. Specifically it is shown that the main driving forces are unemployment, self-employment and the tax burden, which have different weights in these 39 countries. Between 1999 and 2010 indirect taxes have by far the largest relative impact (29.4%), followed by self-employment (22.2%), unemployment (16.9%), personal income taxes (13.1%) and tax morale (9.5%).

Keywords: state regulation, tax pressure, tax morale, shadow economy, undeclared work

JEL Classification: K42, H26, D78

Suggested Citation

Schneider, Friedrich G. and Buehn, Andreas, Shadow Economies in Highly Developed OECD Countries: What are the Driving Forces? (October 13, 2012). IZA Discussion Paper No. 6891, Available at SSRN: https://ssrn.com/abstract=2161228

Friedrich G. Schneider (Contact Author)

Johannes Kepler University Linz - Department of Economics ( email )

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

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Institute for the Study of Labor (IZA)

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Bonn, D-53072
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Andreas Buehn

University of Cooperative Education Bautzen ( email )

Loebauer Strasse 1
Bautzen, 02625
Germany

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