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Title:Beyond the veil of ignorance: The influence of direct democracy on the shadow economy PDF Logo
Authors:Schneider, Friedrich
Teobaldelli, Désirée
Issue Date:2012
Series/Report no.:CESifo working paper: Public Finance 3749
Abstract:In this paper we analyze the influence of direct democratic institutions on the size and development of the shadow economies. The framework developed predicts a negative relationship between the degree of direct democracy and the size of the shadow economy. Countries where direct democratic institutions support democratic life are expected to be characterized by a lower informal sector, ceteris paribus. The empirical / econometric investigation of a sample of 56 democracies confirms our core hypothesis and demonstrates that the effect of direct democratic institutions on the shadow economy is negative and quantitatively important; the results are robust and also depend on the interaction of direct democracy with other political institutions, such as district magnitude.
Subjects:shadow economy
direct democratic institutions
district magnitude
good governance
JEL:O17
D78
H11
H26
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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