Edited by Arnis Sauka, Friedrich Schneider and Colin C. Williams
Chapter 9: What is to be done about entrepreneurship in the shadow economy?
The aim of this chapter is to review the various policy options, approaches and measures that can be used to address shadow economy entrepreneurship. To do this, it first reviews four possible policy options: taking no action, eradicating shadow entrepreneurship, moving legitimate entrepreneurship into the shadow economy, or transforming shadow entrepreneurship into legitimate entrepreneurship. Revealing that transforming shadow entrepreneurship into legitimate entrepreneurship is not only the most viable option but also the approach most commonly adopted by supra-national agencies and national governments, a review is then undertaken of how this can be achieved using either direct controls, which seek to increase the costs of shadow entrepreneurship and/or the benefits of legitimate entrepreneurship, or indirect controls that seek to generate a commitment to compliance and greater self-regulation. It is then revealed how these approaches and their accompanying policy measures are not mutually exclusive and can be combined in various ways, exemplified by the responsive regulation and slippery slope approaches. The outcome is a comprehensive review and evaluation of the various policy options, approaches and measures available to policy-makers to address shadow entrepreneurship along with some recommendations regarding the way forward.
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