THE IMPACT OF TAX MORALE ANDINSTITUTIONAL QUALITY ON THESHADOW ECONOMY

This paper analyses how tax morale and countries´ institutional quality affect the shadoweconomy, controlling in a multivariate analysis for a variety of potential factors. The literaturestrongly emphasizes the quantitative importance of these factors to understand the level andchanges of shadow economy. Relatively new available data sources offer the uniqueopportunity to shed more light in the understanding of a topic that has received an increasedattention. We find strong support that a higher tax morale and a higher institutional qualitylead to a smaller shadow economy.