Friedrich Schneider

Economic and political determinants of foreign direct investment

Abstract Four models explaining the flow of foreign direct investment in 80 less developed countries are econometrically estimated and compared by ex post forecasts. A politico-economic model which simultaneously includes economic and political determinants performs best. The higher the real per capita GNP and the lower the balance of payments deficit are, the more foreign direct investment is attracted. Among the political determinants the amount of bilateral aid coming from Western countries and multilateral aid has a stimulating effect, while help from communist countries has a negative effect. Political instability significantly reduces the inflow of foreign direct investment.

New Estimates for the Shadow Economies all over the World

This paper presents estimations of the shadow economies for 162 countries, including developing, Eastern European, Central Asian, and high income OECD countries over 1999 to 2006/2007. According to our estimations, the weighted average size of the shadow economy (as a percentage of ‘official’ GDP) in Sub-Saharan Africa is 37.6%, in Europe and Central Asia (mostly transition countries) 36.4% and in high income OECD countries 13.4%. We find that an increased burden of taxation (direct and indirect ones), combined with (labour market) regulations and the quality of public goods and services as well as the state of the ‘official’ economy are the driving forces of the shadow economy.

Shadow Economies Around the World: Size, Causes and Consequences

Using various methods (currency demand, physical input (electricity) method, model approach), which are discussed and criticized, estimates of the size of the shadow economy in 76 developing, transition and OECD-countries are presented. The average size of a shadow economy varies from 12 percent of GDP for OECD, to 23 percent for transition and to 39 percent for developing countries. An increasing burden of taxation and social security contributions combined with rising state regulatory activities are the drivin g forces for the increase of the shadow economy especially in OECD-countries. According to some findings, a growing shadow economy has a negative effect on official GDP growth, and a positive impact of corruption on the size of the shadow economy can be found.

Survey on the Shadow Economy and Undeclared Earnings in OECD Countries

In most OECD countries the policy instrument of choice to prevent people from working in the shadows has been deterrence. While deterrence is well founded from a theoretical point of view, the empirical evidence on its success is weak: tax policies and state deregulation appear to work much better. The discussion of the recent literature underlines that in addition to economic opportunities, the overall situation in the labor market and unemployment are crucial for an understanding of the dynamics of the shadow economy. Copyright 2010 The Authors. Journal Compilation Verein fur Socialpolitik and Blackwell Publishing Ltd. 2010.Abstract This paper investigates consumer expenditures of German households pre- and post-retirement. The widely observed distinct drop in spending upon retirement entry poses an empirical puzzle since life cycle theory predicts smoothing of the marginal utility of consumption over time. As one explanation, I explore the role of home production as a substitute for consumer expenses. Taking a combined look at consumer expenditures and time use pre- and post-retirement, I find a significant drop of about 17% of pre-retirement expenses at retirement which coincides with an increase in time spent on home production of an additional 89 minutes per day, accounting for 21% of average home production.

Competing models of international lending activity

Abstract Four competing models of the World Banks lending to developing countries are constructed and econometrically estimated by pooled time series and cross-section data. The analysis suggests that a model combining economic and political determinants performs best. Besides per capita income, inflation, balance of payment and budget deficit, external debt and past growth, political determinants such as the ‘capitalist’ climate or political instability are also important, as well as a recipient countrys former status as a colony or dominion. This politico-economic-model is successfully used to forecast the distribution of IBRD loans and IDA credits among the developing countries.

What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries

Considerable evidence suggests that enforcement efforts cannot fully explain the high degree of tax compliance. To resolve this puzzle of tax compliance several researchers have argued that citizens’ attitudes toward paying taxes defined as tax morale helps to explain the high degree of tax compliance. However, most studies have treated tax morale as a black box without discussing which factors shape it. Additionally, the tax compliance literature provides little empirical research that investigates attitudes toward paying taxes in Europe. Thus, this paper is unique in its examination of citizen tax morale within three multicultural European countries, Switzerland, Belgium and Spain, a choice that allows far more detailed examination of the impact of culture and institutions using datasets from the World Values Survey and the European Values Survey.

Estimating the Size of the Danish Shadow Economy using the Currency Demand Approach: An Attempt

The currency demand approach pro vides some insight into the size anddevelopment of the shadow economy in Denmar k. Currency demand is statistically affected by tax rates. The difference in cur rency demand is calculated by comparing the actual tax burden over time to the l owest tax burden in the period 1952-82. The shadow economy grewsteadily to 10 p ercent (of GNP) in 1977 and then fluctuated between 7 and 10 percent (of GNP) fo r the period 1978-82. The calculated size fits nicely with the results obtained using the same method for Norway, Sweden, and West Germany. Copyright 1986 by The editors of the Scandinavian Journal of Economics.

The shadow economies of Western Europe

The latest empirical research indicates a strong increase in the size of the shadow economy in Western Europe, over the period 1970 to 1990. For 11 of the 17 investigated OECD-countries the size of the shadow economy in 1990 was more than 10% of GNP. Analysis shows that the major causes of the shadow economy are the direct and indirect tax burden, and government regulation.

Measuring the Size and Development of the Shadow Economy. Can the Causes be Found and the Obstacles be Overcome

In this chapter the various methods to measure the size and development of the shadow economy are shortly discussed and criticized. Then the results of two methods, the currency demand and model approach are presented and it is shown that for the year 1978 and for 16 of 24 OECD-countries the size of the shadow economy is more than 5% of the GNP. The next step is to analyze the effects of policy change on the shadow economy, like a major decline of the direct tax burden in the year 1989 in Austria with the expectation of a decreasing shadow economy. However, one observes an increasing shadow economy in the years 1989 to 1991 in Austria, because other important factors, why people work in the shadow economy, like regulation, have increased during this time, which offset the lower tax burden.

Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences matter?

From an economic point of view, legal considerations apart, tax avoidance, tax evasion and tax flight have similar effects, namely a reduction of revenue yields, and are based on the same desire to reduce the tax burden. Due to legal differences and moral concerns it is, however, likely that individuals perceive them as different and as unequally fair. Overall, 252 fiscal officers, business students, business lawyers, and entrepreneurs produced spontaneous associations to a scenario either describing tax avoidance, tax evasion, or tax flight, and evaluated them as positive, neutral or negative. The results indicate that everyday representations differ with respect to tax avoidance, tax evasion, and tax flight. Tax evasion was perceived rather negatively, tax flight neutrally, and tax avoidance positively. Although fiscal officers judged all forms of tax reduction least fair, all sub-samples found tax evasion less fair than tax avoidance or tax flight. With regard to knowledge of tax law and fairness perception, differential effects were found: Business lawyers and entrepreneurs judged tax avoidance the fairer the higher their knowledge was. Fiscal officers, on the other hand, found tax evasion especially unfair if their knowledge was high.