The not so dark side of trust: Does trust increase the size of the shadow economy?
TLDR
A negative relationship between the size of the shadow economy and generalized trust in a sample of countries, both developed and developing, was found in this paper, and the tax compliance effect of trust dominates its role as a substitute for the formal legal system.Abstract:
This paper reports a negative relationship between the size of the shadow economy and generalized trust, in a sample of countries, both developed and developing. That relationship is robust to controlling for a large set of economic, policy, and institutional variables, to changing the estimate of the shadow economy and the estimation period, and to controlling for endogeneity. It is independent from trust in institutions and from income inequality, and is mainly present in the sample of developing countries. Those findings suggest that the tax compliance effect of trust dominates its role as a substitute for the formal legal system.read more
Citations
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Cheating ourselves: The economics of tax evasion
TL;DR: Tax evasion has been extensively studied in the literature as discussed by the authors, with an emphasis on the U.S. income tax, and tax evasion is a legal responsibility of citizens, with penalties attendant on noncompliance.
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Does social trust determine the size of the welfare state? Evidence using historical identification
TL;DR: The authors found that trust determines the size of welfare states as well as three features that are arguably necessary for their preservation: high levels of political confidence, strong legal institutions protecting private property rights, and low levels of bureaucratic corruption.
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Shining a light on the shadows: Identifying robust determinants of the shadow economy
Rajeev K. Goel,Michael A. Nelson +1 more
TL;DR: In this paper, the authors synthesize the literature by identifying robust determinants of the shadow economy and addressing related modeling uncertainty, and they find that bureaucratic complexity is more significant than monetary severity in driving shadow economy, and the incentives of new shadow entrepreneurs are somewhat different from established shadow operators.
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The productivity of trust
TL;DR: In this paper, the authors test whether social trust affects total factor productivity (TFP) using both development and growth accounting and find strong evidence of a causal positive effect of social trust on the level and growth of TFP.
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How to Organize Crime
TL;DR: The role of the external authority is focused on, the optimal information structure is characterized, and the implications of different forms of enforcement on the internal structure of the organization and policy are discussed.
References
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Journal ArticleDOI
Law and Finance
TL;DR: In this article, the authors examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common-law countries generally have the strongest, and French civil law countries the weakest, legal protections of investors, with German- and Scandinavian-civil law countries located in the middle.
Book
Trust: The Social Virtues and the Creation of Prosperity
TL;DR: Fukuyama as discussed by the authors argued that the end of the Cold War would also mean the beginning of a struggle for position in the rapidly emerging order of 21st-century capitalism and argued that in an era when social capital may be as important as physical capital, only those societies with a high degree of social trust will be able to create the flexible, large scale business organizations that are needed to compete in the new global economy.
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Does Social Capital Have an Economic Payoff? A Cross-Country Investigation
Stephen Knack,Philip Keefer +1 more
TL;DR: In this article, the authors used indicators of trust and civic norms from the World Values Surveys for a sample of 29 market economies and found that membership in formal groups is not associated with trust or with improved economic performance.