Affiliations: [a] School of Law, Economics and Political Science,
University of Athens, 6 Themistocleous street, Athens, Greece. Tel.: +30
6977219203; E-mail: Yfantopoulos@gmail.com
| Athens University of Economics and Business, Athens, Greece
Abstract: The size and trends of the Greek underground economy are examined over the period
of 1958 to 2011. Estimates vary according to the method used and the time period
under investigation. Overall, more than one quarter to one third of Greek
economic activities have been either unrecorded or hidden from official
statistics. Tax evasion, labour market rigidities, lack of competition and
over-regulation are among the contributing factors. The underground economy is
often viewed as a serious obstacle to economic growth. However, the empirical
results are ambiguous. Dynamic models are explored to examine the relationship
between the underground economy and economic growth. In the short run, one
percentage point increase in the rate of economic growth would reduce the
underground economy by 0.13, and in the long run by 1.26. The Greek Government
is currently introducing structural reforms pursuing fiscal consolidation,
transparency and e-governance strategies to combat tax evasion, and monitoring
strategies in the statistical system to produce valid and reliable data
sets.
