The Shadow Economy in German Regions: An Empirical Assessment

Authors

  • Andreas Buehn

    Corresponding author
    • Utrecht School of Economics, Utrecht University and International Studies Program (ISP), Andrew Young School of Policy Studies, Georgia State University
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Address for correspondence: Andreas Buehn, Utrecht School of Economics, Utrecht University, P.O. Box 80125, 3508 TC Utrecht, The Netherlands. Tel.: +31 30 253 9434; e-mail: a.buehn@uu.nl

Abstract

Despite the increasing number of contributions to the literature, regional variations of the shadow economy have been hardly studied. This article analyses the determinants and derives the size of the shadow economy on the district level in Germany. I find that an inferior local labour market and the burden of taxation significantly contribute to the existence of the shadow economy, while a better enforcement of tax rules and regulations has the potential to deter such activities. Districts in the affluent south of Germany experience on average smaller shadow economies.

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