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Tax evasion, education and shadow economy

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  • Salvatore Ciucci

    (Università degli studi della Campania “Luigi Vanvitelli”)

Abstract

The aim of the paper is to evaluate the influence of education on tax evasion. This study proposes a theoretical model, in which an agent can choose to allocate his labor effort between two production technologies. Higher levels of education lead to more skilled and specialized workers, and the tax authority can observe the use of advanced tools and equipment. The main result is that an increase in the general level of education leads to a labor effort substitution effect, showing that higher education can reduce tax evasion and the size of the shadow economy. Both static and dynamic estimation techniques are employed to test the theoretical findings, using a sample of 133 countries, over the period 2001–2020. The empirical analysis confirms the significant negative association between education and shadow economy.

Suggested Citation

  • Salvatore Ciucci, 2024. "Tax evasion, education and shadow economy," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-16, August.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:4:d:10.1007_s10644-024-09732-8
    DOI: 10.1007/s10644-024-09732-8
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    More about this item

    Keywords

    Education; Tax evasion; Shadow economy; Labor technology;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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