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The not so dark side of trust: Does trust increase the size of the shadow economy?

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Author Info
Johanna D'Hernoncourt () (CEESE, Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
Pierre-Guillaume Méon () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles, Brussels.)

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Abstract

This paper studies the relationship between the size of the shadow economy and generalized trust, on a cross-section of countries, both developed and developing, and finds that it is significantly negative. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate of the shadow economy and the estimation period, and to controlling for endogeneity. It is independent from trust in institutions. We provide evidence that it is mainly present in the sample of developing countries.

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File URL: http://www.solvay.edu/EN/Research/Bernheim/documents/wp08030.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number 08-030.RS.

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Length: 37 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:sol:wpaper:08-030

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Related research
Keywords: Shadow economy; informal sector; trust.;

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Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology

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