Publication

This paper discusses a bottom-up approach to fight the shadow economy in a decentralizing political power. The paper analyzes the impact of direct democracy and local autonomy on tax morale and the size of the shadow economy. The authors use two different data sets on tax morale at the individual level and macro data of the size of the shadow economy to analyze the institutional effects in Switzerland. The findings suggest that direct democratic rights and local autonomy have a positive effect on tax morale and the size of the shadow economy.