The shadow economy (also known as the black or underground economy) covers a vast array of trade, goods and services that are not part of the official economy of a country. This original and comprehensive Handbook presents the latest research on the size and development of the shadow economy,...

This paper shows that vertical fiscal inefficiencies impede federally organized countries in successfully attracting foreign direct investment. Such countries, particularly if characterized by weak institutions, are disadvantaged in the process of bidding for firms and in their ability to commit...

Conventional wisdom has it that outside sources of information enhance the capability of political institutions to separate selfish from benevolent incumbents. This paper investigates, in the presence of innovative public policies whose outcomes are uncertain, the role of outside information and...

This paper explores the impact of intensified tax competition within federal systems characterized by the presence of both horizontal tax externalities between the states and vertical tax externalities between states and federal government. It shows that although these point in opposite...

This paper analyzes a simple model that captures the relationship between institutional quality, the shadow economy and corruption. It shows that an improvement in institutional quality reduces the shadow economy and a?ects the corruption market. The exact relationship between corruption and...

The causes and consequences of corruption have attracted much attention in recent years by both academics and policy makers. Central in the discussion on the impact of corruption are perception-based indices. Recent research has shown that perceived corruption might not be a good indicator of...

Conventional wisdom has it that policy innovation is better promoted in a federal rather than in a unitary system. Recent research, however, has provided theoretical evidence to the contrary: a multi-jurisdictional system is characterized—due to the existence of a horizontal information...

A rather neglected issue in the tax competition literature is the dependence of equilibrium outcomes on the presence of firms and shoppers (two-sided markets). Making use of a model of vertical and horizontal differentiation, within which jurisdictions compete by providing public goods and...

Recent work has shown that a system of equalization grants can limit tax competition among lower-level governments. The structure of such models, however, does not allow for the federal to be an active player but its role is being limited in the administration of the equalization grants. The...

This paper investigates the implications of vertical fiscal externalities for the optimal federal tax and the sign of fiscal gap in the presence of ad valorem taxation. It is shown that the federal government can always achieve the second-best optimum for public good provision. The sign of the...