Entrepreneurship and the Shadow Economy
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Entrepreneurship and the Shadow Economy

Edited by Arnis Sauka, Friedrich Schneider and Colin C. Williams

The shadow economy has become the focus of policy makers around the world. This timely book explores the relationship between entrepreneurship and the shadow economy by reviewing how to measure, explain and tackle this hidden enterprise culture. The editors bring together leading authorities in the field to examine existing methods to measure the shadow economy, explore entrepreneurship and shadow economy practices in various contexts, and provide policy suggestions for decreasing the shadow economy. It concludes by encouraging further research in this ever-growing field.
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Chapter 9: What is to be done about entrepreneurship in the shadow economy?

Colin C. Williams


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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