Handbook on the Shadow Economy
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Handbook on the Shadow Economy

Edited by Friedrich Schneider

The shadow economy (also known as the black or underground economy) covers a vast array of trade, goods and services that are not part of the official economy of a country. This original and comprehensive Handbook presents the latest research on the size and development of the shadow economy, which remains an integral component of the economies of most developing and many developed countries.
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Chapter 11: The Link between the Intrinsic Motivation to Comply and Compliance Behaviour: A Critical Appraisal of Existing Evidence

Martin Halla


Martin Halla 11.1 INTRODUCTION In recent years, the economic literature on the shadow economy and tax evasion emphasized the importance of moral considerations (or social norms) to explain compliance behaviour.1 Likewise, research on public enforcement of law increasingly considers social norms because of their role to substitute or to complement formal laws, and because of the potential impact of laws on social norms (Polinsky and Shavell, 2000). This trend most likely results from the fact that neo-classical models of compliance – in the spirit of the economics-of-crime approach – overpredict real-world compliance. Many scholars therefore conclude that the explanation for the tendency to comply must be that individuals are obeying a norm (Posner, 2000). As a response, theoretical papers incorporated individuals with an intrinsic motivation to comply (for example, Gordon, 1989; Erard and Feinstein, 1994; Traxler, 2010). More recently, an increasing number of empirical papers (to be discussed below) have tried to quantify this intrinsic motivation with survey data. In most of the cases, scholars study the case of tax evasion, and analyze the intrinsic motivation to pay taxes, which is known as tax morale.2 The increasing popularity of theses studies can be shown by the number of papers indexed in Google Scholar over time.3 Figure 11.1 shows that the number of published papers on tax morale was below ten per year throughout the 1990s. However, thereafter the number sharply increased, and since 2006 we are observing more than 100 papers per year.4 These papers typically aim to identify factors (both on...

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