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The Shadow Economy in Germany - A Blessing or a Curse for the Official Economy?

Author

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  • Schneider, Friedrich

    (Johannes Kepler University Linz (Austria))

Abstract

This article provides an estimation of the size and development of the shadow economy of Germany, using various estimation procedures. The shadow economy is defined as market-bound production of goods and services which escape detection in the official estimates of GDP. An increased burden of taxation and social security payments, combined with intensive labour market regulation, insufficient quality of state institutions and low tax morale are the driving forces for the shadow economy. Moreover, the results of recent surveys for Germany demonstrate that the readiness to undertake illicit employment as well as its acceptance is high in Germany and other countries. Finally, conclusions are made about the effect of the shadow economy on the official one and incentive-oriented policy means are presented, so that the ‘black’ value added can be transformed into the official value added.

Suggested Citation

  • Schneider, Friedrich, 2008. "The Shadow Economy in Germany - A Blessing or a Curse for the Official Economy?," Economic Analysis and Policy, Elsevier, vol. 38(1), pages 89-111, March.
    • Handle: RePEc:eee:ecanpo:v:38:y:2008:i:1:p:89-111
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    Citations

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    Cited by:

    1. Aristidis Bitzenis & Vasileios Vlachos & Friedrich Schneider, 2016. "An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(1), pages 165-196, January.
    2. Luisanna Onnis & Patrizio Tirelli, 2010. "Challenging the popular wisdom. New estimates of the unobserved economy," Working Papers 184, University of Milano-Bicocca, Department of Economics, revised Apr 2010.
    3. Todorović, Miodrag & Ljajić, Samir & Ivanović, Aleksandar R., 2016. "Effects of Tax Audit on Tax Evasion and Grey Economy in the Republic of Serbia," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2016), Rovinj, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Rovinj, Croatia, 8-9 September 2016, pages 155-160, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    4. Luisanna Onnis & Patrizio Tirelli, 2011. "Institutions, policies and economic development. What are the causes of the shadow economy?," Working Papers 206, University of Milano-Bicocca, Department of Economics, revised Mar 2011.
    5. Gaetano Lisi, 2015. "Tax morale, tax compliance and the optimal tax policy," Economic Analysis and Policy, Elsevier, vol. 45(c), pages 27-32.
    6. Berthold, Norbert & Coban, Mustafa, 2013. "Mini- und Midijobs in Deutschland: Lohnsubventionierung ohne Beschäftigungseffekte?," Discussion Paper Series 119, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    7. Paul Vivien OYIBO & Friedrich SCHNEIDER, 2022. "How large is the size of Côte d'Ivoire's informal sector? A MIMIC approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(633), W), pages 205-216, Winter.
    8. Mehmet Ela, 2013. "An Assessment on the Relationship Between Informal Economy and Educational Level in Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 910-922.
    9. González-Fernández, Marcos & González-Velasco, Carmen, 2015. "Analysis of the shadow economy in the Spanish regions," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 1049-1064.
    10. Maria José Portillo Navarro & Pilar Ortiz García & Francisco Morales González, 2017. "Fraude Fiscal, Turismo Y Economía Sumergida En España. Un Análisis Por Cc Aa," Revista de Estudios Regionales, Universidades Públicas de Andalucía, vol. 1, pages 101-123.
    11. Helmut Herwartz & Friedrich Schneider & Egle Tafenau, 2011. "Regional Patterns of the Shadow Economy: Modelling Issues and Evidence from the European Union," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 6, Edward Elgar Publishing.
    12. Berthold Norbert & Coban Mustafa, 2013. "Mini- und Midijobs in Deutschland: Lohnsubventionierung ohne Beschäftigungseffekte? / Mini- and Midi-Jobs in Germany: Do Wage Subsidies have an Effect on Employment?," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 64(1), pages 289-324, January.
    13. Hajilee, Massomeh & Niroomand, Farhang, 2019. "On the link between financial market inclusion and trade openness: An asymmetric analysis," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 373-381.
    14. Caro, Paolo Di & Sacchi, Agnese, 2020. "The heterogeneous effects of labor informality on VAT revenues: Evidence on a developed country," Journal of Macroeconomics, Elsevier, vol. 63(C).

    More about this item

    Keywords

    shadow economy; inofficial economy; black market;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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