Study reveals growth in Austria’s shadow economy

Economic pressures are forcing Austrian workers to leave formal employment for jobs in the "shadow economy," according to a new study by IZA research fellow Friedrich Schneider.

According to the study, Austria’s shadow economy—which includes both undeclared income and criminal activity—is expected to grow by 4.5% in 2015, accounting for around 8% of GDP or €21 billion. This growth is attributed to rising unemployment and high taxes.

Despite this increase, however, Austria continues to have one of the smallest shadow economies within the EU. The biggest unregulated markets can be found in eastern Europe, and those countries which were hardest hit by recent economic crises, such as Greece and Italy, where the shadow economy stands at over 20% of GDP.

The largest EU shadow economy is in Bulgaria, where it accounts for over 30% of GDP. However, Professor Schneider’s study shows that this figure has gradually fallen since 2003, when it stood at around 36%.

Meanwhile, IZA World of Labor has published a new article by Dominik H. Enste on the shadow economy in industrial countries. He argues that: "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."

Friedrich Schneider’s paper can be downloaded here.

Related articles:
The shadow economy in industrial countries, by Dominic H. Enste