{
  "title": "Inclusive Growth, Institutions, and the Underground Economy",
  "publication": "IMF Working Papers, February 1, 2012",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/index.md",
  "summary": "Worldwide protests against the perceived lack of economic opportunity and failure of governance have refocused attention on the need for inclusive growth and strong institutions.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Worldwide protests against the perceived lack of economic opportunity and failure of governance have refocused attention on the need for inclusive growth and strong institutions.\n- In developing countries, large informal economies limit state capacity to deliver governance and strong institutions, which in turn discourages participation in and expansion of the formal economy.\n- The paper analyzes the determinants of the underground economy, with particular emphasis on the role of institutions and the rule of law."
    },
    {
      "heading": "Key findings",
      "content": "- When businesses face onerous regulation, inconsistent enforcement, and corruption, they have an incentive to hide their activities in the underground economy.\n- Empirical analysis suggests that institutions are a more important determinant of the size of the underground economy than tax rates."
    },
    {
      "heading": "Empirical analysis and evidence",
      "content": "- The paper places particular emphasis on the role of institutions and the rule of law in determining the size of the underground economy.\n- Comparative assessment highlights institutional quality and enforcement consistency as stronger correlates of underground economic activity than tax rate levels."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Strengthening institutions and the rule of law is central to reducing the size of the underground economy.\n- Reducing onerous regulation, improving enforcement consistency, and addressing corruption can incentivize businesses to participate in the formal economy.\n- Policies aimed solely at adjusting tax rates are likely less effective than institutional reforms in shrinking the underground economy.\n\nSource: Adil Mohommad, Anoop Singh, and Sonali Jain-Chandra, \"Inclusive Growth, Institutions, and the Underground Economy\", February 1, 2012.\n\n---\n\n Content in this bundle\n\n- wp1247\n  - wp1247 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1247 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/bundle-manifest.json)",
    "Authors: Adil Mohommad, Anoop Singh, Sonali Jain-Chandra",
    "Published: February 1, 2012",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781463937089.001",
    "Worldwide protests against the perceived lack of economic opportunity and failure of governance have refocused attention on the need for inclusive growth and strong institutions.",
    "In developing countries, large informal economies limit state capacity to deliver governance and strong institutions, which in turn discourages participation in and expansion of the formal economy.",
    "The paper analyzes the determinants of the underground economy, with particular emphasis on the role of institutions and the rule of law.",
    "When businesses face onerous regulation, inconsistent enforcement, and corruption, they have an incentive to hide their activities in the underground economy.",
    "Empirical analysis suggests that institutions are a more important determinant of the size of the underground economy than tax rates.",
    "The paper places particular emphasis on the role of institutions and the rule of law in determining the size of the underground economy.",
    "Comparative assessment highlights institutional quality and enforcement consistency as stronger correlates of underground economic activity than tax rate levels.",
    "Strengthening institutions and the rule of law is central to reducing the size of the underground economy.",
    "Reducing onerous regulation, improving enforcement consistency, and addressing corruption can incentivize businesses to participate in the formal economy.",
    "Policies aimed solely at adjusting tax rates are likely less effective than institutional reforms in shrinking the underground economy.",
    "**_wp1247**"
  ],
  "related": [
    {
      "title": "_wp1247",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1247.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1247.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp1247.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/inclusive-growth-institutions-and-the-underground-economy-25721/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T16:06:20.343Z"
}