We review existing estimates of the size of the Spanish underground economy, apply the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007 ) correction procedure to some of them and calculate the size of the underground economy in Spain for the period 1960–2009 by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardà (Eur J Law Econ 32(1):143–163, 2011) . We then extend the MCDR approach with respect to an analysis of the causes of the Spanish underground economy. Contrary to most other studies, we show that the latter is not predominantly caused by tax pressure, but by labor market aspects, macroeconomic influences and criminal activities. Based on these findings we derive some unprecedented policy recommendations.

This article presents new estimates of the Greek underground economy and explores the link between the underground economy and aggregate debt. We show that the Greek underground economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the underground economy is positively related to the debt-to-GDP ratio, implying that fighting the underground economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.

We analyze income tax evasion dynamics in a standard model of statistical mechanics, the Ising model of ferromagnetism. However, in contrast to previous research, we use an inhomogeneous multi-dimensional Ising model where the local degrees of freedom (agents) are subject to a specific social temperature and coupled to external fields which govern their social behavior. This new modeling frame allows for analyzing large societies of four different and interacting agent types. As a second novelty, our model may reproduce results from agent-based models that incorporate standard Allingham and Sandmo tax evasion features as well as results from existing two-dimensional Ising based tax evasion models. We then use our model for analyzing income tax evasion dynamics under different enforcement scenarios and point to some policy implications.

Since the 1950s (Schmolders, 1959) it is well known that behavioral aspects have an influence on tax evasion or tax compliance. In particular, interactions among the various entities involved in the taxation process (e.g. taxpayers, law makers, tax practitioners, tax authorities, etc.), and the dynamics that these interactions may generate, seem to play an important role for the actual level of tax compliance. However, the mainstream neoclassical approach to tax evasion (Allingham & Sandmo, 1972) cannot account for such interactions and dynamics. Therefore, during the last two decades new approaches (e.g. lab experiments, agent-based modeling, etc.) have been developed with a view to model how behavioral dynamics may foster or prevent tax evasion. In addition, empirical evidence has been generated that supports a role for such interaction dynamics. In this contribution we survey the main developments in this research area and provide some suggestions for further research. (C) 2013 Elsevier B.V. All rights reserved.

Growth orientated policy schemes as well as future energy policy must be, to a large extent, concerned with transportation fuel issues. In particular, sustainable growth rates require, among other things, a substantial substitution process, in which biofuels, hydrogen, or environmentally friendly generated electricity substitute for fossil fuels continuously. In this paper we model this substitution process by incorporating both, a non-renewable resource and a renewable resource, which can both serve for producing transport fuels, into a conventional Romer-type endogenous growth model. Moreover, as a prominent feature of the modeling we also capture the fact that biofuels production may compete with food production for arable land. The main results of the paper, the Keynes-Ramsey rule, the modified Hotelling rules for the renewable and non-renewable resource, and the fuel versus food trade-off are discussed in some detail. Numerical simulations of the model are illustrating the main results.

We investigate an inhomogeneous Ising model in the context of tax evasion dynamics where different types of agents are parametrized via local temperatures and magnetic fields. In particular, we analyse the impact of backauditing and endogenously determined penalty rates on tax compliance. Both features contribute to a microfoundation of agent-based econophysics models of tax evasion.

Summary In this paper I examine the relationship between Pareto-optimality and group size in linear public goods games or experiments. In particular, I use the standard setting of homogeneous linear public goods experiments and apply a recently developed tool to identify all Pareto-optimal allocations in such settings. It turns out that under any conceivable circumstances, ceteris paribus, small groups have a higher Pareto-ratio (Pareto-optimal allocations over total allocations) than large groups. Hence, if Pareto-optimality of an allocation is a property that makes such allocations acceptable and maintainable, small groups will find is easier to provide Pareto-optimal amounts of a public good than large groups. This is a novel reasoning for Mancur Olson′s claim, in particular, with respect to what he has termed inclusive goods and inclusive groups.

The current sovereign debt crisis in several European countries demonstrates impressively the social and economic significance of tax evasion and the underground economy. Economic research and analysis is required to understand and to fight effectively these developments. This volume contributes empirical, simulative and theoretical evidence on tax evasion and the underground economy. The contributions originate from an international conference on “The Shadow Economy, Tax Evasion and Money Laundering”, held at the University of Munster, Germany, in July 2011. This conference brought together researchers from 25 countries with a view to discuss the most recent topics in these research areas. Further details are available from the conference homepage at http://www.wiwi.uni-muenster.de/shadow2011/. Eight papers were chosen to best represent edge cutting research advances in the analysis of tax compliance and the underground economy.

This article provides experimental evidence regarding the influence of positive rewards on income tax evasion behavior. In particular, the authors experimentally test the impact of positive rewards in the form of individual lottery winnings for fully compliant taxpayers. Among other things, the authors find that these positive rewards lead to a higher rate of tax compliance. Moreover, there are two gender effects. Males not only evade taxes to a much higher extent than females they also show a stronger positive response to the lottery scheme. This allows us to draw some interesting policy recommendations on the efficient use of rewards as a complement of deterrence policies for fighting tax evasion.

Based on the Ahumada et al. (Rev Income Wealth 53(2):363–371, 2007) critique we revise existing estimates of the size of the German underground economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German underground economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio approach, which is not subject to the recent critique and apply it to Germany for the period 1960–2008.

We analyze the evolution and extent of income tax evasion under alternative governmental policies in an agent-based model with heterogeneous agents. A novel aspect of our modeling is the use of an exponential utility function, which allows us to assume rather realistic audit probabilities and to yield more realistic results with respect to the extent of tax evasion. Further, the introduction of lapse of time effects constitutes another novel aspect of our model. Among other things, the model allows for assessing the impact of alternative policies on tax evasion. Subject to the model features, we find that ethical norms and lapse of time effects reduce the extent of tax evasion particularly strongly.

This judicious selection of recent essays demonstrates the applicability of the fundamental principles of neo-Schumpeterian economics, namely, innovation and uncertainty. The authors demonstrate how neo-Schumpeterian economics is developing into a comprehensive economic theory encompassing industry, the public sector and financial markets.

This paper provides experimental evidence regardi ng the influence of positive rewards on income tax evasion behavior. In particul ar, we experimentally test the impact of positive rewards in form of individual lottery winn ings for honest taxpayers. Among other things, we find that these positive rewards lead to a significantly higher rate of tax compliance. Moreover, there are two gender effects. Males not only evade taxes to a much higher extent than females, they also show a strong er positive response to the lottery scheme. This allows us to draw some interesting policy reco mmendations.