ABSTRACT
Tax evasion, illicit work and social security fraud are widely spread. The causes, effects and problems generated by increasing shadow economic activities are extensively and controversially discussed in the Economic Cooperation and Development (OECD) and EU-Accession countries. The quality of institutions can for example explain two-thirds of the variance of the shadow economy in OECD and transition countries. An increasing burden of taxation and social security contributions are – as well as regulations and the poor quality of institutions – the driving forces for the increase of the shadow economy especially in OECD-countries, as the empirical analysis here proves. More empirical evidence is presented for the influence of working time regulation on illicit work. For transition countries, multivariate analysis provide evidence for the significant influence of corruption, economic freedom and the quality of institutions on the size if the shadow economy. Hence, liberalisation and more economic freedom will reduce corruption.
