Ethnic divisions, trust, and the size of the informal sector

TY - JOUR

T1 - Ethnic divisions, trust, and the size of the informal sector

AU - Lassen, David Dreyer

N1 - JEL Classification: H26, J15, O17

PY - 2007

Y1 - 2007

N2 - This paper investigates the relationship between ethnic fractionalization and the size of the informal, or hidden, economy. Recent experimental and empirical research links, in turn, ethnicity and trust, and trust and tax compliance. In addition, recent empirical studies have identified an unwillingness to contribute to public goods benefiting other ethnic groups. Combining these insights, we argue that increasing ethnic fractionalization decreases voluntary tax compliance, and we present empirical evidence at the macro level in a cross-section of more than 50 countries that more ethnically fractionalized societies have significantly larger informal sectors

AB - This paper investigates the relationship between ethnic fractionalization and the size of the informal, or hidden, economy. Recent experimental and empirical research links, in turn, ethnicity and trust, and trust and tax compliance. In addition, recent empirical studies have identified an unwillingness to contribute to public goods benefiting other ethnic groups. Combining these insights, we argue that increasing ethnic fractionalization decreases voluntary tax compliance, and we present empirical evidence at the macro level in a cross-section of more than 50 countries that more ethnically fractionalized societies have significantly larger informal sectors

KW - Faculty of Social Sciences

KW - informal sector

KW - ethnic fractionalization

KW - ethnic divisions

KW - public finance

KW - trust

U2 - 10.1016/j.jebo.2005.07.001

DO - 10.1016/j.jebo.2005.07.001

M3 - Journal article

SN - 0167-2681

VL - 63

SP - 423

EP - 438

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

IS - 3

ER -