Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/34144 
Year of Publication: 
2007
Series/Report no.: 
IZA Discussion Papers No. 2563
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper analyses how governance or institutional quality and tax morale affect the shadow economy, using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited number of investigations use cross-sectional country data with a relatively small number of observations, and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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