Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97434
Authors: 
Schneider, Friedrich
Buehn, Andreas
Dell'Anno, Roberto
Year of Publication: 
2013
Series/Report no.: 
Working Paper, Department of Economics, Johannes Kepler University of Linz 1321
Abstract: 
This paper presents an empirical analysis of the relationship between fiscal illusion and the shadow economy for 104 countries over the period 1989-2009. We argue that both unobservable phenomena are closely linked to each other, as the creation of a fiscal illusion may be helpful if governments want to control shadow economic activities. Using a MIMIC model with two latent variables we confirm previous findings on the driving forces of the shadow economy and identify the main determinants and indicators of fiscal. Most importantly, we find that fiscal illusion negatively affects the shadow economy: Concealing the real tax burden through fiscal illusion potentially contributes to the government's efforts to repress shadow economic activities.
Subjects: 
Fiscal illusion
shadow economy
MIMIC model
latent variables
tax burden
tax complexity
JEL: 
O17
K42
O54
N16
Document Type: 
Working Paper

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