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Download the Paper (345 K, PDF file) - January 22, 2007 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing.

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.

SUGGESTED CITATION:
Benno Torgler and Friedrich Schneider, "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis" (January 22, 2007). Berkeley Program in Law & Economics, Working Paper Series. Paper 213.
http://repositories.cdlib.org/blewp/art213