Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis

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.

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Year of publication:	2007-02-01
Authors:	Torgler, Benno ; Schneider, Friedrich
Institutions:	School of Economics and Finance, Business School
Subject:	Shadow economy \| tax morale \| governance quality \| government intervention \| corruption

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Extent:	application/pdf
Series:	School of Economics and Finance Discussion Papers and Working Papers Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	The School of Economics and Finance, Level 8, Z Block, Gardens Point Campus, 2 George Street, Brisbane, QLD 4001, Australia, email: benno.torgler@qut.edu.au. ** Department of Economics, Johannes Kepler University of Linz, A-4040 Linz-Auhof, Austria. E-mail: friedrich.schneider@jku.at, http://www.econ.jku.at/Schneider. Both are research fellows of CREMA – Center for Research in Economics, Management and the Arts, Switzerland. We would like to thank Howard Abrams, Doris Aebi, Robert Cooter, Jesse Fried, John McNulty, Eric Talley, Luciano Benetti Timm and participants of the Law and Economics Workshop at UC Berkeley and the 2006 National Tax Association Conference in Boston for helpful comments and suggestions. Financial support from the Swiss National Science Foundation is gratefully acknowledged. Number 210 6 pages long
Classification:	D73 - Bureaucracy; Administrative Processes in Public Organizations; Corruption ; D78 - Positive Analysis of Policy-Making and Implementation ; H2 - Taxation, Subsidies, and Revenue ; H26 - Tax Evasion ; O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; O5 - Economywide Country Studies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005766362