The Shadow Economy in Industrial Countries : (Reducing the Size of the Shadow Economy Requires Reducing its Attractiveness while Improving Official Institutions)

The shadow economy should not be seen as solely an economic problem, to be resolved by attacking the symptoms through higher fines and tougher controls. A country-specific analysis of causes and consequences is necessary to develop policy measures appropriate to the country’s level of development. Policymakers should view illicit work as a signal of the need to decrease the attractiveness of the shadow economy through better regulation, a fair and transparent tax system, and more efficient institutions (good governance). Organized crime, corruption, and illegal employment should nevertheless be fought through stricter controls and enforcement.