The Impact of Tax Morale and Institutional Quality on the Shadow Economy

51 Pages Posted: 19 Jan 2007

See all articles by Benno Torgler

Benno Torgler

Yale University - Yale Center for International and Area Studies

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)

Date Written: January 2007

Abstract

This paper analyses how tax morale and countries' institutional quality affect the shadow economy, controlling in a multivariate analysis for a variety of potential factors. The literature strongly emphasizes the quantitative importance of these factors to understand the size and development of the shadow economy. Relatively new data sources that have become available offer an exceptional opportunity to shed more light on a topic that is attracting increasing attention. We find strong support for the assertion that a higher tax morale and a higher institutional quality lead to a smaller shadow economy.

Keywords: shadow economy, tax morale, institutional quality, government intervention, corruption

JEL Classification: D73, D78, H2, H26, O17, O5

Suggested Citation

Torgler, Benno and Schneider, Friedrich G., The Impact of Tax Morale and Institutional Quality on the Shadow Economy (January 2007). IZA Discussion Paper No. 2541, CESifo Working Paper Series No. 1899, Available at SSRN: https://ssrn.com/abstract=958248

Benno Torgler

Yale University - Yale Center for International and Area Studies ( email )

P.O. Box 208206
New Haven, CT 06520-8206
United States

HOME PAGE: http://www.crema-research.ch/fellowseiten/torgler.htm

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

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