Use this identifier to quote or link this document: http://hdl.handle.net/2072/169685

Does the EU financing system contribute to shadow economic activity?
Herwartz, Helmut; Theilen, Bernd
Universitat Rovira i Virgili. Departament d'Economia; Universitat Rovira i Virgili. Centre de Recerca en Economia Industrial i Economia Pública
Financial contributions to the EU budget depend basically on official GDP. This means that countries with higher shadow economic activity contribute less than they should contribute in a system based on actual GDP and therefore could reduce their incentive to fight against such activities. In this paper we investigate if the EU financing system really has an influence on the intensity with which governments in EU member states fight against shadow economic activity. We find that the EU net contributors significantly fight more intensively against shadow economic activity while EU net receivers significantly fight less. As a result, shadow economic activity is higher in net receiver and lower in net contributor countries than it were in comparison with a scenario of nationally balanced EU funding. Quantitatively and averaged over the time period 2001-2007, the diagnosed effect amounts to a stimulation of hidden economic activity by almost 10% for particular economies. JEL classification: C31, D63, F33, H21, H26. Keywords: EU financing system, shadow economy, tax auditing.
2011
339 - Comerç. Relacions econòmiques internacionals. Economia mundial. Màrqueting
Finances públiques -- Unió Europea, Països de la
Pressupost -- Unió Europea, Països de la
Economia submergida
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Working Paper
1988 - 0812
Documents de treball del Departament d'Economia;2011-16
         

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