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Title: An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?
Authors: Bitzenis, Aristidis
Vlachos, Vasileios A.
Schneider, Friedrich
Type: Article
Subjects: FRASCATI::Social sciences
Keywords: corruption
economic crisis
shadow economy
sovereign debt crisis
Issue Date: 2016
Source: Journal of Economic Issues
Volume: 50
Issue: 1
First Page: 165
Last Page: 196
Abstract: We explore the determinants of the Greek shadow economy, its interaction with the official economy, and its relationship with corruption. In doing so, we undertake — for the first time — an interdisciplinary review of economic and political studies on the size and determinants of the shadow economy, tax evasion, undeclared work and, moreover, of their relation with corruption in Greece in order to reveal the extent and complexity of these phenomena. We estimate the size and determinants of the shadow economy via a multiple-indicators-multiple-causes (MIMIC) approach. Our findings indicate that the important determinants are factors related to macroeconomic conditions, such as unemployment and GDP growth, and institutional factors, such as tax morale and the rule of law. We also indicate that the shadow economy and corruption are complementary and that the official and the shadow economy substitute each other over the business cycle. An adoption of policy based on these findings would lead to a successful transfer of part of the shadow economy to the official economy, would boost government revenue, and would eventually lead the Greek economy out of the depression that emerged as a result of the sovereign debt crisis.
ISSN: 0021-3624
Other Identifiers: 10.1080/00213624.2016.1147918
Appears in Collections:Department of International and European Studies

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