Does the shadow economy have an asymmetric effect on indirect taxes? Fresh evidence from OECD countries
Economic Change and Restructuring, cilt.59, sa.5, 2026 (SSCI, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 59 Sayı: 5
- Basım Tarihi: 2026
- Doi Numarası: 10.1007/s10644-026-10063-z
- Dergi Adı: Economic Change and Restructuring
- Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, ABI/INFORM, EconLit, Geobase, Social Science Premium Collection (ProQuest), Business Source Ultimate (EBSCO), Health Research Premium Collection (ProQuest), Pharma Collection (ProQuest)
- Anahtar Kelimeler: Economic growth, Government size, OECD, Panel ARDL, Panel NARDL, Shadow economy
- Çukurova Üniversitesi Adresli: Evet
Özet
Recent estimates of the size of the shadow economy (%GDP) indicate that it ranges from 12% to 34% globally and for OECD countries indicate that the shadow economy is substantial. Estimates by the World Bank indicate a reduction in the average size of the shadow economy (% of GDP) across 36 OECD countries, from 19.57% in 1995 to 18.29% in 2020. Over the relevant period, the shadow economy, on average, constitutes 18.47% of economic activity. Therefore, approximately one-fifth of GDP remains unregistered, posing a significant problem for tax revenues. Although there is a relative consensus on the extent to which the shadow economy reduces tax revenues, the situation is more complicated regarding indirect tax revenues. Specifically, the literature presents multiple arguments about whether the shadow economy may increase or decrease indirect tax revenues. However, the asymmetric effects of the shadow economy on indirect tax revenues have not been addressed, to the best of our knowledge. In this context, the study aims to examine the symmetric and asymmetric effects of the shadow economy on indirect tax revenues. To do this, annual data for 36 OECD member countries over the period 1995–2020 were analyzed using the Panel ARDL and Panel NARDL methods. The effects of economic growth and government size are also controlled for in the analysis. The findings are as follows: (I) In the long run, economic growth and government size positively affect indirect taxes in both symmetric and asymmetric models. (II) In the symmetric model, the shadow economy increases indirect taxes in the long run. In the short run, it has a diminishing effect. (III) In the asymmetric model, the shadow economy exerts asymmetric effects on indirect tax revenues in the long run. In the short run, an asymmetric relationship does not hold. These findings emphasize that, in addition to the general belief that the shadow economy reduces tax revenues, different effects may arise when indirect tax revenues are taken into account.