Corruption and the shadow economy: an empirical analysis

By Axel Dreher, Friedrich Schneider. Social Science Research Network, 2010

573 citations recorded by the source corpus.

This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 98 countries. Our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions-based indices of corruption are used. Employing an index of corruption based on a structural model, however, corruption and the shadow economy are complements in countries with low income, but not in high income countries.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/7eb9cf073a07d9365d6a971f68f7a54b5e0de7b9

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Citations in the corpus

Shedding Light on the Shadow Economy: A Global Database and the Interaction with the Official One (2019, background): “Dreher and Schneider (2009), Dreher and Katsogrannis (2009), Williams and Schneider (2016), Schneider (2017), and Medina and Schneider (2018) compare also section 2, where this problem is tackled.”
Lurking in the cities: Urbanization and the informal economy (2013, background): “…other open questions including even such basic ones such as whether informal sector size would be larger in low income or high income nations (see Dreher and Schneider, 2010); whether taxes are positively correlated with informal sector size or not (See Schneider and Enste, 2000, Friedman et al.…”
Consumer Expenditures and Home Production at Retirement – New Evidence from Germany (2007, background): “(2000), Dreher and Schneider (2009), Dreher, Kotsogiannis and Macorriston (2007, 2009) argue that the efficient and discretionary”
Intelligence and corruption (2012, background): “…concerns on omitted variable bias: average years of schooling (Barro and Lee, 2010), social trust (Bjørnskov, forthcoming), size of the shadow economy (Dreher and Schneider, 2010), an OECD dummy variable, trade openness (Penn World Tables 6.3) instead of the KOF index of economic globalization.”
The Impact of Tax Morale and Institutional Quality on the Shadow Economy (2009, background): “The first result is in line with previous findings such as Friedman et al. (2000) and Dreher and Schneider (2006).”
Taxing the unobservable: The impact of the shadow economy on inflation and taxation (2017, unknown): “Dreher and Schneider (2010) similarly find that the relation between corruption and the shadow economy differs between developed and developing countries.”
How Does Corruption Affect Public Debt? An Empirical Analysis (2017, result): “Empirical studies however, tend to support the view that corruption is associated with a larger shadow economy (see Dreher & Schneider, 2010; Schneider, 2011; Schneider & Enste, 2000).”
How do institutions affect corruption and the shadow economy? (2009, background): “Indeed, this is an issue investigated by Dreher and Schneider (2007) who argue, in a follow-up to this study, that corruption and the shadow economy might be substitutes in high income countries only, but might be more likely to be complements in low income countries.”
Shadow Economies around the World: Model Based Estimates (2012, background): “1 + gc = Ct Ct−1 Moreover, informal labor can be obtained now using (5) as follows: NSt = { γθSt (1− τ)(1− α)θFt [ (1 + gc)/β − 1 + δ α(1− τt)θFt ] α 1−α } 1 1−γ (7) Given the characterization of the model, we now can turn to the calibration and how we back out the size of the shadow economy using t”
The Shadow Economy and Work in the Shadow: What Do We (Not) Know? (2012, background): “…that the size of the shadow economy should be lower in a federal system than 19 See e.g. Johnson et al. (1998a, b), Friedman et al. (2000), Dreher and Schneider (2009), Dreher, Kotsogiannis and Macorriston (2007, 2009), as well as Teobaldelli (2011), Teobaldelli and Schneider (2012),…”