Corruption and the shadow economy: an empirical analysis

This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a cross-section of 98 countries. Our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions-based indices of corruption are used. Employing an index of corruption based on a structural model, however, corruption and the shadow economy are complements in countries with low income, but not in high income countries.     

Global corruption and the shadow economy: spatial aspects

Using a large sample of nations, this paper examines the relation between corruption and the shadow economy, focusing especially on geographic spillovers. The results point to complementarity between corruption and the shadow economy. We find evidence of own contagion across nations in both corruption and shadow economy activity, while cross-contagion mostly points to substitution between own shadow economy (corruption) and neighboring corruption (shadow economy). These findings are fairly robust across different estimation techniques and measures of the shadow economy.     

Local autonomy, tax morale, and the shadow economy

Policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale. However, there is an alternative bottom-up approach that decentralises political power to those who are close to the problems. This paper analyses the relationship with local autonomy. We use data on tax morale at the individual level and macro data on the size of the shadow economy to analyse the relevance of local autonomy and compliance in Switzerland. The findings suggest that there is a positive (negative) relationship between local autonomy and tax morale (size of the shadow economy).     

The influence of direct democracy on the shadow economy

We analyze, both theoretically and empirically, the influence of direct democratic institutions on the size and development of shadow economies. Our model suggests that, as the extent of direct democracy increases, implemented fiscal policies more nearly reflect the preferences of citizens and so reduce their incentives to operate in the informal sector. This theory implies a negative relationship between the extent of direct democracy and the size of the country’s shadow economy. We also theorize that direct democracy has a greater effect in reducing the informal sector when the former is at low or intermediate values and when the electoral system is characterized by a larger district magnitude. An empirical investigation of a sample of 57 democracies confirms our model’s predictions.     

The rise of the shadow economy: An Indian perspective

This study was undertaken to understand the importance of the shadow economy, which is often misunderstood and misquoted. We come to an understanding of why this is an uproar regarding black money generation in India. This paper is an attempt to bring forward past evidences and current situation to understand the system through discussing various points of views in the literature. The paper concludes with bringing out the difference in black wealth and black money and the impact of both on the economy and answers the question—Is black money really bad for the economy? It is a hope that these results will be useful to policymakers and stakeholder to make policies that cater to all.     

Visualizing the invisible hands: the shadow economy in North Korea

Abstract

The outside world is well aware of the totalitarian side of North Korea. Much less well-known is the shadow economy of the country which has enveloped the everyday lives of ordinary North Koreans for the last fifteen years or so. Based on refugee testimonies, this article aims to shed light on this heretofore unexamined aspect of the country, by visualizing the invisible hands of the ever-growing shadow economy in North Korea. In particular, we will investigate who the main actors are (the agency question), how they obtain their items (the supply mechanism), how they move items from one place to another (the distribution mechanism) and who consumes these items (the consumer question) in contemporary North Korean society.     

The shadow economy and sustainable development: The role of financial development

This paper provides fresh evidence concerning the threshold relationship between the shadow economy and financial development. Shadow economy is quoted as an obstacle to sustainable development and therefore the role of financial development is examined in this paper to tackle the issue of shadow economy. It is based on panel data of 29 developed and developing countries over the period of 1975–2015 and use of panel threshold model. Three proxies for financial development—liquid liabilities, private credit to deposit money banks, and stock market capitalisation—were utilised to obtain the threshold value of US$33,600 Gross Domestic Product (GDP) per capita. This threshold helps to determine the impact of financial development on the size of the shadow economy. Empirical results suggest that above this threshold, financial development significantly contributes to the reduction in size of the shadow economy while it has no impact for countries that have per capita income below this threshold. This implies that, countries with lower per capita income (below $33,600) should implement policies to improve accessibility to finance and credit market which leads to a sufficiently higher per capita income that in turn allows for a reduction in the size of the shadow economy.     

Federalism and Decentralization: Ownership Rights and the Superiority of Federalism

The benefits and costs usually ascribed to federalism are benefitsand costs of decentralization; they are, therefore, presentin unitary states that are in fact all decentralized. The benefitsand costs specific to federalism pertain to ownership rightsin constitutional powers. Federalism is superior to confederalismand unitarianism because the ownership rights peculiar to thatsystem of government are such that they ensure the perduranceof competition when one or more competitors are unsuccessful.They do so because under federalism, powers cannot be repossessedunilaterally. Ownership rights have to be enforced; as a consequence,there are also costs that are specific to federalism.     

Federalism and the European Parliament

The European Parliament has been a source of controversy sinceits inception. Its direct election was seen as endorsing a federalstructure and political future for the European Community (laterEuropean Union). Changes in its authority and legislative powerswere seen as symptomatic of creeping federalism and the emasculationof member states' national sovereignty. The European Parliament'sconscious contribution to developing federalism and constructinga federal Europe relate to its direct election, its powers,and its proposals to hold a constitutional convention. The Anglo-Saxonmisconception of federalism is analyzed, the role of a billof rights examined, and the failures of democratic legitimacyexposed with a view to see what contribution federal bargainsmay make to close the democratic deficit and to impel a reviewof the current institutional arrangements.     

Try Federalism

The present article follows up a previous study (Anckar 1998) which showed a strong association between size and party system fragmentation. The aim of the article is to see whether the explanatory power of size can, in fact, be attributed to a federal form of government. 77 countries with free party systems constitute the research population. The dependent variable has three components: number of parties, electoral support for the leading party, and the 'effective number of parties' calculated according to the Laakso-Taagepera formula. Preliminary tests reveal that federal states have a more fragmented party system than unitary states. However, when controlling for size, electoral system, the 'effective threshold,' and presidentialism, the results clearly show that federalism is overshadowed by size and also, to a lesser extent, by the effective threshold.     

Collaborative Federalism

Famously, federalism combines self-rule with shared rule or unity with diversity. Typically, the mix is achieved by creating or preserving two levels of government, each with a direct relationship with the people, and by dividing power between them. Traditionally, unity is achieved through the exercise of power by the central government, in relation to the polity as a whole. Diversity is the consequence of the exercise of power by sub-national governments over a portion of the population, generally territorially identified. The boundaries of power between the two spheres are secured by entrenching them in a written Constitution established as fundamental law, which is interpreted and applied by a court or courts.     

Federalism and Consociational Regimes

Federalism and consociationalism are useful means of understandingpolitical systems. Federalism and consociationalism are bothbased on compound majoritarianism rather than simple majoritarianism,and both represent modern attempts to accommodate democraticcomplexity and pluralism, but the two systems are not quitesymmetrical, and territorial organization is not the only characteristicthat differentiates them. Instead, it can be said that federalismrelates to the form of a polity, while consociationalism relatesto the character of a regime. To the extent that federalismmay also function as the character of a regime, then federalismand consociationalism may be more symmetrical. One of the ambiguitiesof federalism is that it is often both form and regime. Consociationalism,however, relates only to regime.     

Water and Federalism in the 1990s

Federalism has always been an issue in water management. Thephasing out of grants for the construction of sewage treatmentplants, the reduction of the federal contribution for constructionof water development projects, the decrease in federal expendituresfor basic water data collection, and the lack of federal fundsfor state dam-safety programs have all had an impact on watermanagement and intergovernmental relations. This article summarizescontemporary issues in intergovernmental relations and waterpolicy. First, the relationship between water, environmentalprotection, and federalism is examined. Then, the shifting financialresponsibility for water pollution control from the federalto state and local governments is reviewed.     

American Federalism on the Horizon

The American federal system took some unpredictable twists andturns during the twentieth century. As a new century—indeed,a new millennium—begins, which trends are likely to continue,which are likely to dissipate? What issues pose the greatestchallenges for the intergovernmental system? This article plotsseveral possible paths along which the federal system couldtravel over the next decade. The fundamental issue in Americanfederalism is a perennial one: How will the balance of powerbetween the federal government and the states change? Otherkey issues facing American federalism are identified and theirlikely impacts examined. The article concludes with an assessmentthat the next decade in American federalism may be surprisinglyrobust.     

Pragmatic Federalism: Australian Federalism from Hawke to Howard

The article explores the nature of Australian federalism by examining four major themes in the period from Hawke to Howard. The investigation of these themes – Australian conceptions of federalism; the role of party in shaping federalism; the way problems and politics have influenced policy‐making and thereby federalism; and the nature of federal judicial review – suggests that Australian federalism can most accurately be characterised as pragmatic. It appears as a federalism shaped by pressing problems, specific policy agendas and the prevailing political dynamic, rather than by overarching conceptions of federalism derived from political theory or articulated in party ideology. This pragmatic federalism explains important aspects of Australian federalism, especially the trend towards centralisation of authority.     

Federalism and Community in the American Context

The rise of modern federalism was shaped significantly by desiresto protect smaller, diverse communities against forces of imperialcentralization. The protection of community liberty was seenas a prerequisite for protecting individual liberty as well.As such, a federal polity was seen to be a limited self-governingcommunity of entrenched self-governing constituent communities.The rise of the idea of national community and the ideologyof the cosmopolitan nationstate, however, eroded the legitimacyand authority of local self-government and, thereby, federalism.Constituent communities also came to be seen as oppressive,especially of individual rights. Yet, desires for local self-governmenthave maintained a strong hold on public opinion, and recentextensions of individual rights, particularly voting rights,coupled with policy weaknesses of the national government andmodernization of state governments appear to be renewing possibilitiesfor revitalizing federalism as a self-governing community ofself-governing communities.     

Sense on Federalism

Debate on the relevance (or otherwise) of federalism to the development of the European Union is often characterised by mutual incomprehension on either side. Close inspection, however, reveals that the high temperature of argument may not be solely due to differing visions of the finalite politique. For the precise meaning of the federal concept in political science remains unsettled. This article looks back to the earliest origins of federalism, in order to establish a firm basis for suggesting improvements. The idea of divided sovereignty, ‘invented’ in America and now thought to lie at the heart of the federal concept, is identified to be a false construction. On these grounds, it is proposed that the definition of federalism be clarified today as not ‘a division of sovereignty between two levels of government’, but instead ‘a division of the powers flowing from sovereignty between two levels of government of equal status’.