The role of tax competitiveness and neutrality in shaping the size of the shadow economy: Cross-country empirical evidence

Authors

• James W. Saunoris, Eastern Michigan University
• Zarina Nurmanova*, Eastern Michigan University

Document Type

Article

Publication Date

2025

Department/School

Economics

Publication Title

Journal of Economics and Finance

Abstract

This empirical paper examines the relationship between the tax competitiveness and neutrality of a country’s tax system and the size of shadow economies across countries. Utilizing panel data from 38 OECD countries spanning the years 2014 to 2017 and a two-way fixed effects two-stage least squares estimation, the findings reveal that heightened tax competition is associated with a smaller shadow economy and this effect is both statistically significant and economically important.

Comments

J. W. Saunoris is a faculty member in EMU's Department of Economics.

*Z. Nurmanova is an EMU student.

Link to Published Version

DOI: 10.1007/s12197-024-09695-6

Recommended Citation

Saunoris, J. W., & Nurmanova, Z. (2025). The role of tax competitiveness and neutrality in shaping the size of the shadow economy: Cross-country empirical evidence. Journal of Economics and Finance, 49(1), 95–118. https://doi.org/10.1007/s12197-024-09695-6