The Shadow Economy

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Date Submitted: 11/27/2012 01:47 AM

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The Shadow Economy




Term Paper


Camille-Marie Heuls & Sabine Weiss

Group 1

(Due: March, 14th 2012)


1.Introduction 3

2.What is the Shadow Economy? 3

2.1 The situation in Austria 4

3.What are the types you can differentiate? 4

3.1 Crime and Illicit work 5

4.What are the effects on government policy, welfare of society and national accounting? 5

4.1 Government policy 6

4.2 Effects on the Official Economy and Social Welfare 7

4.3 National accounting 7

4.4 The situation in Austria 8

5.What can a government do to reintegrate segments of the Shadow Economy into the regular economy? 8

5.1 Governmental measurements in Austria 8

6.The Shadow Economy’s impacts on the current recession? 9

6.1 The situation in Austria 9

7.Conclusion 10

8.Bibliography 11


This term paper, will attempt to explain the Shadow Economy in more detail. We will mainly focus on Austria, as a case study. For a better understanding, we will mention the impact of the Shadow Economy on the government policy, the welfare of society and national accounting. Furthermore, we will illustrate the measures a government has to take to reintegrate segments of the Shadow Economy into the regular economy. In addition, we will discuss the impact of the current recession on the Shadow Economy and show the Shadow Economy’s both sides of the coin.

2.What is the Shadow Economy?

The “Shadow Economy” is a phenomenon, whose awareness increased and developed more and more during the last decades. The term refers to people, who work illegally, buy or sell legal and illegal goods and services at lower prices, and do not pay taxes. As a consequence of high unemployment rates, a bad economy and continuing financial crisis, this phenomenon is spreading all over the world and involving an...