34. International Public Finance Conference
The Underground Economy And Financial Development Theory And EvidencesSalvatore Capasso
The underground economy2 is a major concern in many economies. In contrast to what might be expected, this is true not only for developing but also for developed countries. Estimates for the former put the size of the underground economy at 30-40% of GDP, whilst estimates for the latter put the size at 10-15% of GDP (Schneider, 2007). A large underground sector is not only of economic concern (e.g., due to its potential generate inefficiencies and resource misallocations) but also of political concern (e.g., because of its perception as a measure of a deeply unfair tax system).