Chapter 9: Who is Working Illicitly and Why? Insights from Representative Survey Data in Germany
Dominik H. Enste 9.1 INTRODUCTION There has been controversy over the last 25 years about the exact definition as well as appropriate estimation methods to measure the size of the shadow economy (see for example Schäfer, 1984). The causes, consequences and instructions for economic policy have also been studied extensively (see for example Schneider and Enste 2000a, b, 2002; Enste and Schneider, 2006a, b, 2007; Enste and Hardege, 2007). Contrary to the former research topics, this analysis focuses on the following question: what kind of people do work illicitly – and why? In order to tackle the topic, a broad overview of basic knowledge is provided in the next section (9.2): first, the terms ‘shadow economy’ and ‘illicit work’ will be defined followed by some information about their size and structure. Section 9.3 presents an evaluation of socio-economic data that have been derived from different surveys. Using the example of Germany, whether the ‘usual suspects’ are most likely to act as supplier or demander on the shadow market is considered. Some explanations for these developments as well as some estimates on the expected value loss are presented. Section 9.4 discusses strategies to reduce shadow economic activities. Measures to fight illicit work, by means of more frequent controls and rigorous punishment, have proven to be hardly successful. Furthermore, the efficiency of arrangements for tax deductibility of handicraft and home-related services is in doubt, too. In the current public discussion, minimum wages are considered as a possible solution to the problem, though...
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