The Shadow Economy

Illicit work social security fraud economic crime and other shadow economy activities are fast becoming an international problem. This second edition uses new data to reassess currency demand and the model approach to estimate the size of the shadow economy in seventy-six developing transition and OECD countries. This updated edition argues that during the 2000s the average size of a shadow economy varied from 19% of GDP for OECDs to 30% for transition countries and 45% for developing countries. It examines the causes and consequences of this development using an integrated approach explaining deviant behavior which combines findings from economic sociological and psychological research. The authors suggest that increasing taxation social security contributions rising state regulatory activities and the decline of the tax morale are all driving forces behind this growth and they propose a reform of state public institutions in order to improve the dynamics of the official economy.