Dodging the Grabbing Hand: The Determinants of Unofficial Activity in 69 Countries

• DOI: 10.2139/ssrn.194628
• Publication Date: 2005-08-19T20:28:02Z
• Authors: Eric Friedman; Simon H. Johnson; Daniel Kaufmann; Pablo Zoido
• Keywords: Land Grabbing

Across 69 countries, higher tax rates are associated with less unofficial activity as a percent of GDP but corruption is more activity. Entrepreneurs go underground not to avoid official taxes reduce the burden bureaucracy and corruption. Dodging Grabbing Hand in this way reduces revenues both total GDP. As result, corrupt governments become small only relatively uncorrupt can sustain high rates.