Institutions, policies and economic development. What are the causes of the shadow economy?

Luisanna Onnis () and Patrizio Tirelli

No 206, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: What are the causes of the shadow economy? We provide new answers to this old question. The sharp distinction between theoretical priors on the institutional determinants of the shadow economy and the technique used for its measurement is the first novel contribution of the paper. The second innovation is that, unlike previ- ous contributions, we document a specific role for institutional variables in shaping economic incentives to "go underground", irrespective of the stage of economic de- velopment. The third innovation is that - after controlling for institutional quality and for the level of development - public expenditures have a negative impact on the shadow economy.

Keywords: Institutional quality; shadow economy. (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011-03, Revised 2011-03
New Economics Papers: this item is included in nep-hme
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:206

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