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The Shadow Economy
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  • 27 b/w illus. 28 tables
  • Page extent: 0 pages

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 (ISBN-13: 9780511030284 | ISBN-10: 0511030282)

Illicit work, social security fraud, economic crime and other shadow economy activities are fast becoming an international problem. Friedrich Schneider and Dominik H. Enste use currency demand, physical input (electricity) method, and the model approach to estimate the size of the shadow economy in 76 developing, transition and OECD-countries. They argue that during the 1990s the average size of a shadow economy varied from 12 per cent of GDP for OECD, to 23 per cent for transition and to 39% for developing countries. They examine the causes and consequences of this development using an integrated approach explaining deviant behaviour, which combines the findings of economic, sociological and psychological research. The authors suggest that increasing taxation, social security contributions, rising state regulatory activities and the decline of the tax morale, are all driving forces behind this growth, especially in OECD-countries. They propose a reform of state institutions to improve the dynamics of the official economy.

• A collection of data on the size of shadow economies in over 70 countries around the world. • Comprehensive economic survey of developing, transitional and OECD-countries • Highly important strategy for policy makers to deal with the shadow economy


List of figures; List of tables; Foreword Vito Tanzi; 1. The shadow economy: a challenge for economic and social policy; 2. Defining the shadow economy; 3. Methods to estimate the size of the shadow economy; 4. Size of shadow economies around the world; 5. The size of the shadow economy labour force; 6. An integrated approach to explain deviant behaviour; 7. Analysing the causes and measures of economic policy; 8. Effects of the increasing shadow economy; 9. The 'two-pillar strategy'; 10. Conclusion and outlook; List of references; Index.


'The authors discuss in great depth the various approaches to measuring a phenomenon which at first seems to evade observation. Most importantly, they provide the best existing survey of the size and causes of the shadow economy. This will be, without a shadow of doubt, the standard treatment of the subject for many years to come.' Bruno S. Frey, University of Zurich and Netherlands Institute of Advanced Study

'This book is a valuable compendium of information and analysis on a problem that policy makers cannot afford to neglect.' Hans-Werner Sinn, University of Munich and President of the Ifo Institute for Economic Research

'The underground economy has continued to defy attempts by governments to eliminate it, by statistical offices to measure it in a convincing way, and by revenue administrations to tax it. To succeed, these attempts must be based on detailed understanding of this phenomenon. this book should much improve out understanding of the underground economy and will help policy makers to better cope with its consequences.' Vito Tanzi, Under Secretary of State in the Italian Ministry of Economy and Finance

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