IZA Discussion Paper No. 5769June 2011
ABSTRACTThe Shadow Economy and Shadow Economy Labor Force:What Do We (Not) Know?
In this paper the main focus lies on the development and the size of the shadow economyand of undeclared work (or shadow economy labor force) in OECD, developing and transitioncountries. Besides informal employment in the rural and non-rural sector also other measuresof informal employment like the share of employees not covered by social security, ownaccount workers or unpaid family workers are shown. The most influential factors on theshadow economy and/or shadow labor force are tax policies and state regulation, which, ifthey rise, increase both. Furthermore the discussion of the recent literature underlines thateconomic opportunities, the overall situation on the labor market, and unemployment arecrucial for an understanding of the dynamics of the shadow economy and especially theshadow labor force.JEL Classification: K42, H26, D78Keywords: shadow economy, undeclared work, shadow labor force, tax morale,tax pressure, state regulationCorresponding author:Friedrich SchneiderDepartment of EconomicsJohannes Kepler University of LinzAltenbergerstr. 69A-4040 LinzAustriaE-mail:firstname.lastname@example.org