Presents institutional reforms to improve the dynamics of the official economy against shadow economies.

Illicit work, social security fraud, economic crime and other shadow economy activities are fast becoming an international problem. Friedrich Schneider and Dominik H. Enste use currency demand, physical input (electricity) method, and the model approach to estimate the size of the shadow economy in 76 developing, transition and OECD-countries. They argue that during the 1990s the average size of a shadow economy varied from 12 per cent of GDP for OECD, to 23 per cent for transition and to 39% for developing countries. They examine the causes and consequences of this development using an integrated approach explaining deviant behaviour, which combines the findings of economic, sociological and psychological research. The authors suggest that increasing taxation, social security contributions, rising state regulatory activities and the decline of the tax morale, are all driving forces behind this growth, especially in OECD-countries. They propose a reform of state institutions to improve the dynamics of the official economy.

List of figures
List of tables
Foreword Vito Tanzi
1. The shadow economy: a challenge for economic and social policy
2. Defining the shadow economy
3. Methods to estimate the size of the shadow economy
4. Size of shadow economies around the world
5. The size of the shadow economy labour force
6. An integrated approach to explain deviant behaviour
7. Analysing the causes and measures of economic policy
8. Effects of the increasing shadow economy
9. The 'two-pillar strategy'
10. Conclusion and outlook
List of references
Index.