This paper studies the driving forces behind the considerable expansion of the underground economy during the late 1990s. I propose a novel explanation for this phenomenon: the sharp increase in market competition worldwide, which reduces prices and profits and drives firms into the shadow economy. Empirical evidence from a panel covering 45 countries from 1995 to 2000 shows that increased competition is indeed correlated with an expansion of the underground economy. The effect is strongest in low-tax, high-corruption countries that do not provide the public services which make it worthwhile for firms to remain official despite growing competitive pressure.

The Underground Economy in the Late 1990s: Evading Taxes, or Evading Competition? / GIARDINO-KARLINGER, Liliane. - In: WORLD DEVELOPMENT. - ISSN 0305-750X. - 37:10(2009), pp. 1600-1611. [10.1016/j.worlddev.2009.03.001]

The Underground Economy in the Late 1990s: Evading Taxes, or Evading Competition?

Liliane Karlinger
2009

Abstract

This paper studies the driving forces behind the considerable expansion of the underground economy during the late 1990s. I propose a novel explanation for this phenomenon: the sharp increase in market competition worldwide, which reduces prices and profits and drives firms into the shadow economy. Empirical evidence from a panel covering 45 countries from 1995 to 2000 shows that increased competition is indeed correlated with an expansion of the underground economy. The effect is strongest in low-tax, high-corruption countries that do not provide the public services which make it worthwhile for firms to remain official despite growing competitive pressure.
The Underground Economy in the Late 1990s: Evading Taxes, or Evading Competition? / GIARDINO-KARLINGER, Liliane. - In: WORLD DEVELOPMENT. - ISSN 0305-750X. - 37:10(2009), pp. 1600-1611. [10.1016/j.worlddev.2009.03.001]
File in questo prodotto:
File Dimensione Formato  
WorldDev-Revised Version.doc

Open Access

Tipologia: Documento in Post-print
Licenza: Creative commons
Dimensione 434.5 kB
Formato Microsoft Word
434.5 kB Microsoft Word Visualizza/Apri
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/10025
Citazioni
  • Scopus 14
  • ???jsp.display-item.citation.isi??? 14
social impact