Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33465
Authors: 
Dreher, Axel
Schneider, Friedrich G.
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers 1936
Abstract: 
This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.
Subjects: 
corruption
shadow economy
regulation
tax burden
JEL: 
D73
H26
O17
O5
Document Type: 
Working Paper

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