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Empirical Evidences and New Policy Issue

at European Level

INDEX

Introduction 3

Report 1st day “Empirical Evidence” 7

Report 2nd day “New Policy Issues at European Level” 12

Conclusions “The Need for EU-Policy Initiatives” 16

Acknowlegdement 26

List of Experts 27

What is the Avignon Academy 28

Annex 30

Avignon AcademyRue Jacques de Lalaing 4, B-1040 Brussels

Phone: 0032 2 285.07.09, Fax. 0032 2 230.78.61e-mail: b.palmieri@ueapme.kmonet.be

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INTRODUCTION

Blando Palmieri

BackgroundThe present research on “The shadow economy: empirical evidences and new policy issue at European level” of which the Avignon Academy presents the results, is a research project promoted by the craft and small business representatives of different European countries. For the first time organisations of SMEs and craft from Austria and Italy1 came together and asked the Academy to analyse this complex phenomenon through its scientific network.

This confirms two facts. First, small business and craft firms, are deeply affected by the shadow economy in the EU member states and are interested in finding new initiatives which could enable a better understanding of the phenomenon and could indicate more effective intervention at different institutional levels, also in view of the EU enlargement.

The numerous consequences resulting from the shadow economy are well-known. A substantial part of the economy is not accounted for. Therefore, a number of important economic indicators, for example the GDP, appear lower than they actually are. Tax revenues are lower than they could be. Enterprises experience unfair competition, people enjoy less protection (e.g. worker’s insurance or pension coverage) than they are entitled to. They suffer from limitations in their ability to interact with the public sector, financial organisations, and each other. People engaged in the shadow economy enjoy lower status than they would as regular entrepreneurs or workers. Entrepreneurs, workers and the government alike waste considerable resources endeavouring respectively to hide or to unveil shadow activities.

Second, the fact that the research initiative comes from different countries of Europe confirms, the assumption that the shadow economy is an area in which Europe has to promote the right policies and the interest of the business community to see how Europe can contribute to solving the problem.

The policy relevance of the shadow economy in European countries is comparatively new. Some countries have started policy initiatives, namely Italy, which has developed a measure at the end of the 1980s, gradually increased its toolbox, and, recently, launched a substantial campaign for regularisation. Starting at the end of the 1990s, European institutions, too, have taken on the issue.2 The Commission has focused so far on the labour component of the issue.

1 The Italian organizations are: Confartigianato (www.confartigianato.com) and Confederazione Nazionale dell’artigianato e delle PMI,( www.cna.it) and the Austrian organization is the Wirtschaftskammer Österreich ( www.wko.at). 2 European Commission (1998). Commission Communication on Undeclared Work. Brussels, COM (98)-219; European Parliament (1998). Report on the Commission Communication on Undeclared Work. (COM (98) 219 - C4-0566/1998-2082(COS)). Recently, DG Employment has inserted the theme in its guidelines for National Action Plans and has launched a research initiative on some member states’ policies. Finally, the CSF for Italian Objective 1 Regions includes measures for the regularization of undeclared work.

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Taking into account the dual interests of the small business community, the Avignon Academy has planned the research work in order: a) that the analysis of the shadow economy can make a step forward in the comprehension of the qualitative aspects of the phenomenon b) the scientific findings could provide sufficient elements to how the European initiative could give and added value to the national actions.

The preparation phase of the research has revealed that within the European area, the shadow economy is very diverse. The features of the shadow economy vary both between countries, and within each country. Studies and estimates of the extent of the shadow economy also vary, as do interpretations.

Moreover, the issue is a complex one. Economic, social, cultural, and institutional factors interact to create incentives for people to (or not to) regularise their economic activities. No individual cause can be singled out to explain the shadow economy.

Diversity and complexity therefore are composita aspects of the shadow economy and initiatives of the member states have mainly tackled these different aspects of the phenomenon separately. In fact the approach followed by a great number of member states to tackle the complexity has mainly concentrated on a few common issues relevant at member state level, such as taxation, or social contributions. The other approach to tackling the diversity has concentrated its analysis and initiatives only at territorial level, researching the specificity of the aspects of the shadow economy in a particular area and the solution adopted by the local actors for the reduction of the shadow economy.

Moreover, the separation of the two approaches also characterizes the studies and analyses on the shadow economy. Therefore the research work of the Academy has taken stock of this diversity and complexity with the aim of transforming them into a resource in terms of analysis and knowledge.

This approach has focused research in the areas where the issue appears to be severest and most intractable, namely the three large countries (Italy, Germany, and Spain) and in one small country (Sweden) where the shadow economy shapes the functioning of the economy. The aim was to use this as a basis on which to learn lessons on how to handle it elsewhere. The appproach considers the shadow economy in its complexity, studying policy mixes in which the European institutions would interact with the relevant actors at state and local level—supporting their interventions and stepping in to create a facilitating environment only when needed.

By using and integrating different approaches, the aim was to achieve a research program that would lead to the development of recommendations for a European policy.

The methodologyThe methodology chosen by the Avignon Academy scientific committee has been to provoke debate on these (and possibly other) approaches during a workshop, amongst academic experts from the EU Member States, selected for their research on the subject of the shadow economy, and to produce research papers, following the workshop, in order to give to individual analysis the added value of the elements of the debate and the exchange of experience.

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The task to synthesise the debate was assigned to the rapporteurs who summaried the main aspects of the analysis, of issues emerging from the themes and the main scientific findings.

The reports of the workshop and the papers produced by the experts, which are included in this report, have enabled the presentation of a fresh study which will elaborate on the positions expressed during the workshop, and a synthesis which will facilitate the reading of the research results. The reports are not only a synthesis of the presentations and of the debate, but aim to guide the reading of the papers presented by the experts.

The structure of the workshopThe workshop was structured in one and half days. The presentation and the debate on the first day concerned theoretical interpretations and research issues. The second day dealt with the policy issues. The debate considered both Member States’ and EU policies, as well as SMEs’ view on the issue. Against this background, the workshop built up a research framework to identify European level policy issues.

The choice of Ragusa placed the participants in a province where development and spontaneous processes of regularisation have occurred at the very south of the Union and in a country, Italy, that was approving a major regularisation law just at the time of the workshop. The workshop envolved scholars, the Commission, small firm associations, and national policy makers in discussing the shadow economy and in drafting the intellectual basis for policy proposals. In order to ensure an intense exchange of ideas, the number of the participants was kept small. The presence of SME associations emphasised their interest in creating the conditions for the regularisation of the economy.

The research follow upThe result of the research, summarised in the conclusions of this report, contain not only scientific elements with which SME organisations can develop proposals to present to local, national and European institutions in order to improve the initiatives to tackle the shadow economy, but also contains new findings for new research projects in the field.

The Academy will present the scientific findings on its web site, and in the form of Master Classes in order to disseminate them in appropriate circles at European level. The Academy will be also active in order that the co-operation between SME representatives and new research initiatives can be promoted following the results of the research, and the experts participating in the research work will continue to benefit from the exchange of analysis and experiences promoted by the Academy through its electronic journal and in new research programmes.

Brussels, June 2002

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Summary of the 1st day Shadow Economy: Empirical Evidences

Laura Tagle, Ministery of Economy and Finance, Italy

All over Europe, a consistent share of economic activity is carried out irregularly, “in the shadow”. The degree of recourse to the shadow economy varies from country to country, but it is clear that all member states share this feature. European countries also share it with the countries on the Southern shore of the Mediterranean and the East European countries asking to enter the Union.

This fact produces a number of consequences. A relevant part of the economy is not accounted for. Therefore, a number of important economic indicators, namely the GDP, appear lower than they are. Tax revenues are lower than they could be. People enjoy less protection (e.g., worker’s insurance or pension coverage) than they are entitled to. They suffer from limitations in their ability to interact with the public sector, financial organizations, and each other. People engaged in the shadow economy enjoy lower status than they would as regular entrepreneurs or workers. Workers, entrepreneurs, and the government alike waste considerable resources respectively striving to hide or endeavoring to unveil shadow activities.

These consequences, in turn, hinder public policy. Uncertainty on - or misinterpretation of - crucial economic variables may influence the grasp of policies on the economy. Lower tax revenues may create unnecessary distortions and reduce the efficiency and effectiveness of government by limiting the ability of the government to provide services, shifting the tax burden disproportionately onto unintended groups, or increasing tax rates. Limited workers’ and entrepreneurs’ representation further reduces the ability of policies to function efficiently and to adapt to the way the economy and society work.

Addressing this issue, therefore, would improve social, labor, and economic policies; remove distortions; ameliorate governments’ functioning; advance the conditions in which people live, work, and do business. Furthermore, developing a European policy to address the issue would be a cornerstone to enlarging the Union and strengthening its relations with Mediterranean economies.

The policy relevance of the shadow economy in European countries is comparatively new. Some countries have started policy initiatives, namely Italy, that has created a measure at the end of the 1980’s, gradually increased its toolbox, and, recently, launched a substantial campaign for regularization. Starting at the end of the 1990’s, European institutions, too, have taken on the issue.3 The Commission has focused so far on the labor component of the issue.

3 European Commission (1998). Commission Communication on Undeclared Work. Brussels, COM (98)-219; European Parliament (1998). Report on the Commission Communication on Undeclared Work. (COM (98) 219 - C4-0566/1998-2082(COS)). Recently, DG Employment has inserted the theme in its guidelines for National Action Plans and has launched a research initiative on some member states’ policies. Finally, the CSF for Italian Objective 1 Regions includes measures for the regularization of undeclared work.

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To build scientific foundation for the development of a European policy, the Academy Avignon organized a scientific workshop in Ragusa (Sicily). The choice of Ragusa put the participants in a province where development and spontaneous processes of regularization have occurred at the very South of the Union and in a country, Italy, that was approving a major regularization law just at the time of the workshop. The workshop engaged scholars, the Commission, small firm associations, and national policy makers in discussing the shadow economy and in drafting the intellectual basis for policy proposals. In order to ensure an intense exchange of ideas, the size of the floor has been kept small. The presence of SME’s associations stresses their interest in creating the conditions for the regularization of the economy. Recourse to the shadow economy is particularly important for small and medium enterprises, mainly for craft and commerce.

The Academy believes that the shadow economy takes diverse forms in each member state (and within each member state) and that the complexity of the phenomenon makes it impossible to single out just one cause. The Academy, therefore, asked that the debate focus on how to tackle this diversity and complexity. Initially, it identified two approaches: the first one proposing to consider only the aspects that are common and relevant to all member states, the second one taking stock of diversity and complexity by learning lessons from the areas where the issue appears severest and most intractable and where the shadow economy shapes the functioning of the economy.

The first day of the workshop was divided in three sessions: after the opening remarks, the organizing bodies explained the purpose of the workshop. Then, the first day, two sessions ensued, dealing respectively with 1) scientific approaches to the shadow economy dimensions and features and 2) national policies.

The underlying questions were whether and how the European Union should be involved in developing a policy towards the shadow economy. It was clear from the start that all participants agreed that the shadow economy is an issue for the European Union as well as for national governments. As the debate unfolded, roles already played by European institutions clarified, thus suggesting future courses of action. By fixing a 70% employment rate as a European policy target in Luxembourg, the Council put great pressure on national political systems. It also shifted attention to regular employment from unemployment (with its cortege of unemployment compensation and other subsidies providing incentives for people to declare they are unemployed). The concept of subsidiarity has suggested the Committee the practice of supporting and animating local actors (Meldolesi). Structural fund-cofinanced Community Initiatives, such as Urban, have piloted projects and approaches. Coordination functions might avoid that differences in legislation between bordering regions concentrate irregular activities on one side of the border (Hoffman).

Agreement was also reached on the need for EUROSTAT to adopt a common method to factor the shadow economy in its data. So far, some national statistical offices do correct their estimates for the existence of a substantial part of the economy escaping, such as the Italian office (which publishes the correction and uses corrected data for contributions into international bodies) and the German (which does not publish corrected data) one.

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On the other issues, however, the debate was lively. It was soon apparent that the participants referred to different definitions of the shadow economy vary. For example, some approaches include criminal activities (e.g., drug trafficking and prostitution) and the informal sector (e.g. community exchange and auto-production) in the shadow economy. Other approaches, instead, use the “European” definition: “all legal productive activities carried out irregularly”.4

The concept of the role of ethics also greatly varied. Jonsson, for example, was concerned with “economic crime”, which includes tax evasion. This approach was shared, with some differences, by other participants. From this point of view, what matters is individuals’ behavior: the focus is on workers and entrepreneurs evading taxes and social security contributions, on entrepreneurs evading security, environmental, and localization regulations, and on people bartering goods and services. It is incorrect to construct irregular workers and entrepreneurs as criminals (“you can’t make criminals of the people working in the shadow economy”). Rather, it is necessary to alter the system of incentives (Huemer).

Other approaches, instead, shifted the ethics issue onto the state. Governments act unethically:

when they impose excessive tax burdens and excessive regulations, thus curbing the economy;

when, in the attempt to enforce rules and to precisely quantify and regulate productive activities, they intrude in individuals’ lives, work, and business;

when they neglect to enforce the regulations or taxes they impose, thus creating an incentive for individuals’ unethical behaviors.

The ethical dimension is particularly important in regularization. A regularization policy sends the message “say the truth and follow the rules” (Meldolesi).

The role of the recourse to the shadow economy was also debated. The debate uncovered a wide range of opinions. Some view the shadow economy as a “necessary pathology” in a post-fordist society, which provides flexibility and lower prices (Bonomi). Others as an element of entrepreneurs’ strategies, striving to satisfy needs that are, otherwise, perfectly legitimate (Bàculo). For example, in spontaneous enterprise creation, people would operate in the shadow for a while in order to “test” their business idea and learn how to run their enterprise. From this point of view, mere repression would result in an unnecessary hindrance on the economy. Still, it might be a way for entrepreneurs to link labor costs to labor productivity, especially in a context of globalization (Huemer).

Debate was also lively on methods used to study the shadow economy. As already noted, this was one of the issues on which the organizers wanted the debate to focus. Methodological choices differed notably. The participants presented results obtained with a wide range of methods: macroeconomic modeling, surveys, administrative data, or field research.5 Many of them, moreover, use more than one method. Jonsson had used phone and mail surveys, administrative data, and field research. The Italian Committee for regularization of undeclared work uses both administrative data and results from field research.

4 European Commission (1998). Commission Communication on Undeclared Work. Brussels, COM (98)-219.5 Rather than methods, these are families of methods. Field research methods used in Sweden differed from the ones used in Italy.

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Methods should be judged against the objective pursued. “Overview” methods such as macroeconomic modeling and surveys provide information on the extent of the shadow economy and (particularly macroeconomic models) produce useful comparisons. Therefore, they are useful if the objective is, for example, to find out whether the phenomenon is large enough to be relevant - and worth of further research. Schneider’s work has been fundamental in focusing European attention on the issue, by showing its extent, and by comparing the sizes of the shadow economy across countries.

These methods, however, provide little information on the causes of the phenomenon, and therefore are of little help in developing policies. Macroeconomic modeling can only account for a limited number of comparable and easily quantified macro-variables, such as taxation levels. Using results from these methods, though, is risky: since the results are limited to the macro-variables chosen, they may translate into policy recommendations that overlook important elements. In his introductory remarks, Teufelsbauer noted that regressions between the extent of the shadow economy and taxation levels show that countries with the same taxation levels (e.g., Germany and Austria) differ as far as the extent of the shadow economy is concerned.6 Factors such as culture, structure of the economy, and relations between the state and the citizen influence recourse to the shadow economy more than taxation.

Field research constitutes a firmer ground - and provides more information - for policy development. Once one is satisfied (by using “overview” methods) that the issue is relevant, it is not important to be overly precise about the extent of the shadow economy (e.g., to know whether it is 7% or 8.5% of GDP) (Jonsson). What is important is to know how it works. The answer to this question can only be found out through field research (Jonsson). Stame stated that, in order to provide information to change the law, research should show what to do and how to do it.

Field research has yet another advantage (Bàculo). If correctly conducted, it can overcome the diffidence and reluctance to provide information that surveys encounter—sometimes without even realizing that the data they collect are biased.

While “overview” methods seek simplification - isolating the most important features on which to toil - field research is also able to deal with diversity, by finding out the specific tangle of causes provoking the recourse to the shadow economy in each country or region. Simplification is dangerous, since structural asymmetries exist not only among, but also within European countries: the most notable cases are Germany, Italy, and Spain (Meldolesi). Moreover, wage inequalities larger than 30 or 40% are politically and socially not viable. It is, therefore, essential to increase productivity in depressed areas.

Definitions, role of ethics, and methodological approaches have important policy consequences. Policy recommendations from “overview” approaches operated at the national level and focused on the variable observed: lower taxes and reduce regulations (and increase enforcement). If the causes are structural, though, what is needed is a regularization policy improving the conditions in which people do business (Trigo). A diversity approach based on field research also provided “finer” policy recommendations tuned to the respective competencies of the European, national, and local level of government. For example, Bàculo identified a number of

6 Schneider mentioned that he could not explain why this happened.

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tools: benefits for entrepreneurs and workers who “step out of the shade”, establishing the rule of law, improving the functioning of markets, increasing the effectiveness of the government, removing distortion from regulations (even in apparently distant policy areas such as the social security system, localization regulation, housing, or sector norms). Field research can both provide suggestions on what is needed in a particular sector in a particular area and verify and evaluate what policies do and achieve.

Not only do the specific local (and sectoral) features of the shadow economy differ enormously, also local implementation of national colonies varies considerably from area to area. Policy makers should, therefore, get rid of the idea that “one size fits all”(Stame).

Further differences in approach regarded the focus: where should research and policy efforts be concentrated? One option would be to research and operate in the areas and sectors where the problem is severest. Another option might be to concentrate where regularization is supported by and entails economic development, positive social change, and empowerment of hitherto excluded groups (as the Italian Committee for regularization of undeclared work does).

The policy debate concentrated on the Swedish experience (where a research effort had resulted in policy recommendations but not in a policy, presumably for political reasons) and on the Italian one (in which a policy mix, combined with a spontaneous need to regularize, have elicited regularization of 600.000 workers). Over the last years, Italy has developed a policy including tax breaks, sector studies (linking taxable income to the value of certain parameters), changes in norms, centrally-supported local initiatives. Moreover, the government has launched a major regularization plan, which, for the first time, openly recognizes that the issue has an enterprise dimension, rather than just a labor one.

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Summary of the 2nd day „Shadow Economy: New Policy Issues at European Level“.

Alexander Hofmann, Austrian Federal Economic Chamber

The following is a summary of the discussion at the second day of the meeting on "Shadow Economy: Empirical Evidence and New Policy Issues at European Level". The combat against the shadow economy is one of the most controversial issues when it comes down to formulating a European strategy. The national experiences presented on the first day of the meeting and the contribution of Mr. Schneider showed very clearly, that the shadow economy is a common European problem. Regardless of how the size of the shadow economy is estimated, all studies show a rapid increase in its size. In most cases the growth rate in the black economy is higher than in the „official“ economy. The European Union estimates the size of the shadow economy between 7% and 16% of European GDP. This equals a workvolume of 10 - 28 million people. The group agreed unanimously, that the problem of the shadow economy would create considerable challenges in the EU over the next few decades for regional development, public finance, public spending, and labour market and income distribution. The Member States of the European Union must take action to alleviate these problems in a near future, as delays will make the problems more difficult to solve. Corrective measures will be more expensive the later they are initiated.

Mrs. Els van Winkel made clear, that the European Commission takes the phenomenon of increasing undeclared work serious. In 1998 the EU Commission published a communication on undeclared work in Europe. The communication analysed the implications and causes of the shadow economy. It did not attempt to measure the size of it. The idea was to start a European wide discussion about the increasing problems caused by undeclared work. The implications are straightforward: public finances suffer from undeclared work as well as the social systems by loosing social contributions. At the same time most people in the EU have access to the social system and make use of the advantages of the system. This becomes a vicious circle, as the size of the shadow economy rises, the growth rate of the official economy is smaller and the rate of unemployed people is not decreasing.

The main causes identified can be seen as a result of legislation and the social systems implemented in the EU - i.e. the causes of the shadow economy can be found in the roots of the „European Social Model“. Although the social system within the EU are differently formed they have common principles like minimum wages determined by collective agreements, unemployment and social benefits for officially working people and their relatives. Most importantly - they are all funded by contributions from the active working people. The social systems are a main cause for the relatively high non-wage labour costs in the EU- one of the driving forces of the shadow economy. A second major cause is the tax burdens for businesses - especially the unequal treatment of SME and big enterprises in the national tax systems, which force SME into the shadow economy if they can not keep up with the overall productivity (productivity gap). Mr. Teufelsbauer stresses this argument in his intervention.

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But this is not the only cause; also the ongoing globalisation leads to a new working structure in Europe. High quality intangible goods and services are becoming more a more important which means, that less qualified labour-intensive work is shifted to the low-income regions in the world. The more intangible goods and services are produced in an economy, the more susceptible it becomes to the shadow economy.

By showing the problems and indicating the causes, the European Commission advised the member countries to rise the awareness in their countries, to formulate more workable sanctions and to find remedies. The European Parliament called for support in the battle against the shadow economy by implementing a strategy outline incorporated in the European employment strategy. Since the Treaty of Amsterdam and Luxembourg the European Commission has started to formulate yearly guidelines for employment in Europe. These guidelines are a basis for the national action plans on employment. The European Commission is monitoring very closely the effects and efforts taken in the member countries. The analysis of the national reports 2001 showed seven EU members had explicitly mentioned measures against undeclared work in their national plans for employment. The yearly analysis of the national action plans is the basis for next year's guidelines. As the shadow economy becomes an increasing problem for the European social system, the 2002 guidelines explicitly will have one guideline to improve strategies against undeclared work. The focus of the guidelines will be on introducing simpler procedures (e.g. legislation), stronger supervision and punishment. The European Commission will continue to monitor the EU Member States, what kind of strategies they take and what the result is.

From the statement of Mrs. van Winkel it became clear, that although the European Commission is urging the Member Countries to intensify their efforts in their combat that the measures taken must be on the national, and regional level. The most important contribution the European Commission can make is to improve the awareness in the Member Countries, to identify common challenges and help to develop national strategies to solve them. One of the European initiatives could be an idea fostered by Germany, to implement a code of behaviour on a European level.

Mr. Francis Rawlings from DG Regio stated in his contribution, that undeclared work is an important factor in regional and social development. The European Fund for Regional Development, the European Social Fund (ESF), the European Agricultural Fund, the Fishery and Cohesion Fund have two positive effects on the shadow economy - an indirect and direct effect. The indirect effect is that all funds have compliance conditions with regulations. I.e. in practise it is very difficult to involve undeclared work when using the funds. Mr. Rawlings made also clear, that voluntary and social work is brought to the declared sector, by financial incentives provided by the funds. During a very short discussion on the effects it became clear, that there are also disincentives as regulations of funds are understood as being complicated. The direct effect of the funds is that they help small business in less developed regions to become more competitive. This does not only help the business but also helps to develop a sound economic and social infrastructure in the region - i.e. to eliminate fraud.

Mr. Piet Renooy from Regioplan (NL) presented the first results of a study carried out for the EU Commission on measures taken in EU member countries to combat undeclared work (paper is available and the study will be presented together with the results of the Ragusa Talks). He indicated, that the phenomenon of the shadow economy is strongly linked to the regional and national framework and that this

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should be taken in account.

The speeches of the second day indicated like the first day, that there is a very strong national/regional and local content that raises the question:

Is there a European aspect in the combat against undeclared work?This question was investigated by the intervention from Mr. Teufelsbauer. He stated that there seems to be one common cause, the productivity gap. From the discussion about the national experiences during the first day of the conference, it became clear that differences in productivity, either inter-sectoral or inter-regional are a common problem that forces labour intensive services into the shadow economy if they do not want to be eliminated from the market. But this is not the only reason. During the first day, the role of the growing inter-regional productivity gap was stressed by the Italian representatives. Mr. Teufelsbauer presented a model in which he explains the factors driving the increasing inter-sectoral productivity gap, i.e. the different productivity growth rates in manufacturing and services. The argument productivity gap is particulary relevant, if tax burden is taken in consideration. He concludes that it will need a co-ordinated European wide reform of the tax system to cut the vicious circle especially for labour intensive services. A European wide tax reform should concentrate on:

fiscal measures to make the consumption of labour intensive services cheaper

shifting in the tax base towards less mobile tax bases, i.e. consumption or housing.

In his speech Mr. Moro refered to the Italian experience presented during the first day. He made clear, that measures at the European level are limited, as the shadow economy is a result not only of the regional/local framework, but also a result of the culture of a region. The Italian experience in combating the shadow economy showed that the biggest risk is to rely only on one measure. A set of harmonised instruments is necessary. At the European level the member states should share their experience and ideas. It would be very useful to collect and discuss the different approaches how the EU member states combat undeclared work in order to provide the national governments and institutions with a set of good practises, e.g. to develope a policy tool box. This approach would allow the national authorities to choose those strategies, which are appropriate in their country/region (subsidiary of measures).

All participants agreed that the phenomenon of the shadow economy has two main causes, the inter-regional and the inter-sectoral productivity gap. In both cases the tax wedge and the expenses due to the European social model play an enforcing role. To combat the shadow economy policies need to be developed:

to narrow the productivity gap between the manufacturing and the labour intensive service sector (structural policy) and

to reduce the incentives provided by the European social model and

to reform the tax system in such a way, that the tax base become less mobile

The key policy field will be structural policy and taxation policy to reduce the productivity gap. In both fields, the European Commission and the social partners play a prominent role. A good starting point for intensive discussion is the study on undeclared work initiated by the European Commission. The study provides the

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national/local bodies with a set of ideas how they can deal with the shadow economy in their countries. Together with the social partners the discussion about the different approaches should be intensified on the European level.

It must be made clear, that combating the shadow economy does not mean that the european social model is in question, but it will make the social dialogue more important. There is a danger that politicians discuss the combat against the shadow economy in a too simple way. A continuous interaction of all partners on all levels involved is needed to tackle this problem; we cannot rely on a unified solution developed at the European level.

There is a strong need to analyse the driving forces in more detail. This is will be one of the main task of the Academy in cooperation with the European Commission.

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Conclusions The Need for EU-Policy Initiatives

Dr. Werner Teufelsbauer

“Undeclared work” has existed ever since the declaration of work to public authorities was made mandatory. There were periods in history where hiding legal activities was sanctioned heavily by governments. At the end of World War II, e.g. raising a pig “in the shadow” implied the risk of capital punishment for the respective farmer. In the (full employment, high growth) decades following World War II undeclared work did exist in practically all countries, but was not considered to be a major practical problem. Public authorities were not very active in enforcing the rules. Only in the 1990ies the issue began to appear on the national as well as on the EU economic policy agenda. The size of the “shadow economy”, its dynamic growth and the tendency to involve – directly and indirectly – more and more areas of economic, public and civil life have risen the attention of policy makers and of research. There are winners and loosers in the shadow economy game. Public finance and SMEs working in the “formal sector” clearly belong to the loosers. But a closer examination shows that society as a whole would be better off, if the dynamics of the shadow economy could be stopped. The problem cannot be solved by national policies alone – there is a definite role for EU-policy initiatives.

A. The Definition: from “Shadow Economy” to “Undeclared Work”A number of definitions are currently used in the debate. Each definition serves a specific purpose. Empirical research, field research, policy making in each member state have each its own purpose and limitations, and use, therefore, its own definition.

For convenience empirical aggregated research usually defines the Shadow Economy as “market based production of goods and services, whether legal or illegal that escapes the official estimates of GDP” (Smith 1985). With other, more differentiated and focused definitions (e.g. EU: “legal activities carried out irregularily”) empirical estimates of the shadow economy’s size would almost be impossible. Nevertheless, this definition has several shortfalls if applied to economic policy making:

Illegal Activities such as drug dealing, prostitution, fraud, etc. should be stopped and not only transferred to the formal sector which should be the aim for “legal activities” carried out in the Shadow Economy. The latter activities are highly desirable if delivered in the formal sector.

Several countries (e.g. Italy) have already made adjustments in GDP by including at least parts of the informal economy, other countries are still hesitant in doing so.

The definition excludes production which is not market based, although there are good reasons to consider it in the Shadow Economy context:

- Involuntary do it yourself: Shadow Economy market based production is not the only way for consumers to avoid the formal sector. “Do it your-

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self” is the alternative. As long as this alternative is not considered as an end in itself (hobby) but only the best alternative to the formal sector or to the informal market sector (“involuntary do it yourself") it should be included in the definition of the “Shadow Economy in a wider sense”.

- Government support: Where there is no alternative supply of goods and services with a low price elasticity of demand (health care, housing), usually political pressure induces governments to subsidise formal market production or even to provide these goods and services on their own and for free.

In both cases the production is not included in the shadow economy definition, although it is a typical avoidance of the formal market sector. The two cases seem to be of particular importance for Northern European Countries.

Therefore, in a policy context all legal activities crowded out of the formal market sector should be included into the Shadow Economy definition in order to get a clear picture of the size and the structure of the policy problem. On the other hand non-legal activities should be excluded. The traditional definition, therefore is too narrow and too wide at the same time. Empirical estimates on this basis can only be considered as a rough approximation. “Undeclared Work”, on the other hand, is a too narrow definition, because it excludes “involuntary do it yourself” and “government support”, which could be also relevant policy items. It also suggests that the phenomenon mainly comprises “labour issues” although a comprehensive bundle of economic and societal problems are at stake. Nevertheless, this paper will use the term “Undeclared Work” rather than “Shadow Economy” and define it accordingly.

The European Commission defines “Undeclared Work” “as any paid activities that are lawful as regards their nature but not declared to the public authorities, taking into account differences in the regulatory system of Member States. Applying this definition, criminal activities would be excluded, as would work not covered by the usual regulatory framework and which does not have to be declared to the public authorities, such as activities undertaken within the household economy.”7 This definition is used both for policy development and for research, both field research and empirical research.

B. The size of the Shadow Economy – only rough estimates are available

For reasons far beyond problems of definition, measuring the size of the Shadow Economy is difficult. There are direct and indirect approaches (Schneider 2001). Direct approaches usually are survey based (Sweden) or use the discrepancy between declared income for tax purposes and income found in selective checks by tax authorities (administrative data). Indirect approaches use indicators (currency demand, discrepancy between official and actual labour force, discrepancy between national expenditure and income statistics) as proxies for the size of the shadow economy. A more sophisticated approach consists in the estimation of an econometric model based on the statistical theory of unobserved variables. Since all these methods 7 European Commission 1998, Communication of the Commission on Undeclared Work. Brussels COM (98) – 219, page 4.

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have their biases, but presumably in different directions the best estimator is a kind of average over results coming from different methods as offered by Schneider (2001).

Main results 1999/2000

Highest share in GDP Greece 28,7Italy 27,1Spain 22,7Belgium 22,7

Lowest share in GDP Switzerland 8,6USA 8,7Austria 9,8Japan 11,2

Growth of share in GDP(percentage points), 1990-2000

Highest Denmark +7,2Portugal +6,8Spain +6,6France +6,2

Lowest Netherlands +1,2Switzerland +1,9USA +2,0Japan +2,4

Looking at the sectors where Undeclared Work is most prominent, it becomes very clear that Undeclared Work has a very strong SME-context. Sectors mostly affected are sectors, where SME-structures are rather typical. E.g. in Austria these sectors provide about 15% of the market sector’s value added. If Undeclared Work is confined to these sectors an overall Undeclared Work Quota of 7-25% may very well result in a market share of Undeclared Work in affected sectors of 50% and sometimes more. Unfair competition and/or conflicts with government regulations then seem to be a rule rather than the exception there.

Correspondingly, according to Schneider (2001) the share of Undeclared Work in the official labour force is remarkably high in certain countries (amounting to about one third in Italy and Spain, and one fifth in Germany and Sweden).

However, it is important to note that Undeclared Work very often is “marginal”, i.e. individuals devide their working time between the formal and the informal sector. The more Undeclared Work is “marginal”, the higher would be the labour participation rate, the lower the unemployment rate. It is interesting to note that most countries with highest shares of the Shadow Economy in GDP do not have the highest growth of Undeclared Work.

The Italian Committee for regularization of undeclared work is conducting research using yet another method, based on data on regular employment from public

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administrations’ databases (social security services, enterprise registers, professional lists etc.).8 This method produces information about the dimension and structure of regular employment, an important indicator of the situation of the economy.

This method does not estimate the extent of undeclared work or of the shadow economy. However, it provides the basis for the development of policy targets, by estimating the actual extent of the lack of regular jobs. The lack of regular jobs is the differential between the actual number of regular workers and the target employment rate.9

C. A Typology of Undeclared WorkFighting Undeclared Work successfully will only be possible, if we have a tentative model describing its causes and effects, and if we know whether there is one common model applicable to all countries or whether there is a variety of models with different explanatory power for different countries.

Schneider’s (2001) results suggest that a high burden of taxes and social security contributions high regulatory barriers peculiarities of the public sector general cultural factors the specific business circle situation

seem to be the most important reasons for the different size of Undeclared Work in different countries. The papers presented at the Academy Avignon Conference in Ragusa showed that there is not just one model explaining Undeclared Work in a specific country. The papers rather suggest that in each country several models are at work, but different models seem to be dominant in different countries. This implies that there is no single policy to be applied successfully to all countries at the same time, although certain common features can be identified.

The Interregional Productivity Gap Model – the importance of non-tax barriers

The location of the Academy Avignon Conference in the Mezzogiorno and the Italian papers submitted to the conference helped to identify the following Undeclared Work type:

A region where there are high barriers between the formal and the informal sector. In this context the regional public sector seems to play a crucial role. A rather low quality of government services, corruption and a general lack of loyality vis à vis government make it very difficult to qualify for work in the formal sector at reasonable cost; at the same time corruption means considerable tolerance for the informal sector.

8 The Committee used this method in two studies: “Il lavoro regolare in Italia” (Regular Employment in Italy, 2000), “Il lavoro regolare in quattro province meridionali” (Regular Employment in four Southern Counties, 2001).9 In Italy, for example, regularly employed people amount to only 50% of the workforce, while the European Union target for the employment rate in 2010 is 70%.

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There is a comparatively low mobility between the formal and the informal sector (illegal immigrants play an important role). The informal sector covers practically all lines of business. Only a small part of informal work is “marginal”. Productivity of the informal sector is considerably lower (skill gap, investment gap) than in the formal sector.

Due to the productivity gap the informal sector would not be competitive as compared to the formal sector (largely in other regions than the Mezzogiorno) unless certain cost are saved, e.g. taxes, social security contributions, training, health protection, etc. Public authorities seem to tolerate this behaviour.

It was suggested that non-tax barriers (though different than those in Italy) may also have some explanatory power for the situation in former Eastern Germany.

The Intersectoral Productivity Gap Model – the importance of relative price increases

This model refers to sectors (labour intensive, regionally immobile, service-oriented), where productivity growth is considerably lower than in other sectors (e.g. manufacturing, high tech services, consulting, etc.). In a competitive labour market, wage increases are almost the same for all sectors. They are driven by the high productivity growth sector and cannot be matched by productivity growth in the low productivity growth sector. Hence, in the low productivity growth sector increasing unit labour cost have to be covered by increasing product prices.

Option 1: In the case of high price elasticities of demand there will be product substitution: more demand for cheaper products of the high productivity growth sector, less for expensive products of the low productivity growth sector. In order not to loose sales, business is exiting into the informal sector, thus saving taxes, social security contributions and compliance costs. Since usually there are only low institutional and cultural barriers between the formal and informal sector, informal work is “marginal” to a large extent. Therefore, there is almost no productivity gap between the formal and the informal sector. Companies and individuals are in the formal and in the informal sector at the same time. The informal sector is limited to lines of business where public control is difficult. There is only little corruption but public tolerance.

Option 2: In the case of low price elasticities of demand and substitution consumers tend to exercise political pressure on governments to provide “affordable goods and services (e.g. health services, housing, etc.).

The Demand Gap Model – the importance of full capacity economic growth.

In a recession companies quasi automatically loose business, workers loose their jobs. In sectors where public control is difficult or very expensive, companies/individuals are tempted to offset their losses in the formal economy by going into the informal sector, where they can offer lower prices. In a following boom total demand catches up to potential output, with full employment most work will shift back into the formal sector.

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The Net Income Maximization Model – the attraction of free riding.

Even in the absence of productivity and demand gaps and of barriers to enter, companies and individuals are tempted to go into the informal sector (at the margin, in order to remain entitled for public benefits) as long as there are high taxes, social security contributions and compliance costs. Undeclared Work is simply a strategy to increase net personal income at the expense of the community as a whole.This model has only recently been identified in the European Trucking Industry. In at least two EU-MS immigration rules allow trucking companies to hire Third Country truck drivers without any quota limitation as long as these drivers do not physically do their jobs in the respective country which can easily be complied with, since these drivers are used in the international trucking business. Companies have to pay taxes on wages. They have to provide private health insurance and have to make sure that drivers are entitled to old age pensions in their native countries. Potential drivers enter EU-territory with a tourist visa and get residence permits in the two countries concerned as long as they have a job with trucking companies at conditions already described above. Thus on a legal basis the two countries offer practically unlimited EU-access for truck drivers from Third Countries with very low wage levels. Officially companies have to pay wages fixed in collective wage agreements. But Third Country truck drivers are willing to work at inferior conditions (wages as well as working time) which, however, are still much better than in their home countries. Thus, Undeclared Work is quite common in companies which have access to unlimited foreign labour. In order to get access companies move their headquarters to the two EU-countries already mentioned. This means more value added for these countries, but also more and more Undeclared Work in the trucking business and less safety on roads all over Europe.

D. The dynamics of vicious circlesIn most European countries the informal sector is made up by a combination of several Undeclared Work models mentioned above. Each model is a system with inherent “vicious circles” which drive the economy to ever increasing shares of the informal sector in total GDP. The vicious circles are powered by external factors like productivity growth, regulatory barriers and the tax wedge (including social security contributions). The more important these factors are, the faster the circles turn, although there is also a tendency to regularisation when companies become bigger or when there are policy measures which in many cases may not even be directed at Undeclared Work, but nevertheless have a positive side effect.

The “vicious tax wedge circle”: An increasing informal sector implies a contracting tax base and a lower public revenue. If this is offset by higher tax rates the tax burden in the formal sector goes up, thus driving more business into the informal sector.

The “public expense circle”: As demand for public financial support and free public services goes up (due to increasing prices of goods with low price elasticities and low availability in the informal sector), there is need for more public funding, which means higher taxes, which in turn feeds the informal sector and the demand for more government support. In addition it provides momentum for the “vicious tax wedge circle”.

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The “poverty trap”: High barriers between the formal and the informal sector and non-marginal informal work exclude businesses and individuals from government support, training facilities, etc. which are only open for declared work. As a consequence the intrasectoral-interregional productivity gap widens, which forces undeclared work into lower wages and even lower social standards and lower resources for investment and training.

“The business circle prisoners dilemma”: As individual companies and workers try to offset business lost in the formal sector due to a recession by offering work at lower prices in the informal sector and as all businesses/wor-kers independently do the same, total demand will increase only slightly, but tax revenue will be negatively affected. Thus, the government’s ability to fight the recession by fiscal policy is in danger.

E. Why undeclared work should make us worryModern, highly developed societies are sophisticated systems, the success of which depends heavily on a smooth interaction between the public sector, business and civil society. In addition fair conditions for everybody and social justice are a prerequisite for a sustainable development. The existence of Undeclared Work indicates that the interaction does not work well and that there is only limited fairness and social justice. At the same time Undeclared Work itself is the source for ever increasing distortions, unfair conditions and injustice in society (vicious circles). This is true notwithstanding the fact that certain positive aspects can also be mentioned (Trigo Portelo). However, if regulatory, cultural and fiscal barriers causing Undeclared Work were removed, these positive features mentioned would remain although the Undeclared Work would disappear.

Why governments should worry: Beyond the financial problems arising due to the “public revenue and the public expenditure vicious circles” there is the more general problem of lack of fairness and social justice due to informal work. Corruption and fraud are both causes and consequences of Undeclared Work. Thus, the smooth interaction between government and the civil sector is getting more and more difficult, loyality vis à vis government tends to disappear.

Why tax payers should worry: Those who can not use the informal sector (on the supply and on the demand side) have to carry the increasing tax burden (due to the vicious circle), while others are free riders. Higher gross market income does not necessarily mean a higher living standard. Official statistical figures on the distribution of income and wealth are more and more biased: Many “statistically poor” are not as poor as they seem. Some can even become very rich. Official distribution of income and wealth statistics over– and underestimate distribution spreads at the same time. A feeling of general injustice destroys the national consensus for solidary action.

Why the genuine poor should worry: (Marginal) undeclared work provides access to the public social benefit system at very low cost (social security contributions) and at the same time to comparatively high net income. (Marginal) undeclared workers, therefore, get more and pay less they should

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from (to) government, thus reducing public funds available for supporting the genuine poor.

Why Small Business and Non-Marginal Labour should worry: SMEs are highly affected by Undeclared Work. But the problem has never made a carreer as a central issue for SME policy makers. SMEs themselves were reluctant to push the political issue. Have they shied away because most of them are both adversely affected and involved in Undeclared Work at the same time? How can they avoid being blamed for hypocrasy? They are affected, because the majority of SMEs works in the low productivity growth sector, because legal methods of avoiding taxes by using international tax heavens are not as easily accessible as for Big Business, and because compliance costs usually have a fixed cost character, thus making unit compliance costs higher than in Big Business. By working in the informal sector then, both non-marginal companies and workers are excluded from public support schemes (investment, training, etc.) which keeps them caught in the poverty trap.

Why consumers should worry: Buying goods and services from the Shadow Economy means low or even no consumer protection. Switching to involuntary do-it-yourself deterriorates the consumer’s quality of live.

Why economists should worry: At least involuntary do-it-yourself but probably non-marginal Undeclared Work and also government services are less efficient than professional activities in a competitive environment. The economy as a whole, therefore, will be less productive.

F. SolutionsThe Ragusa Conference has made it very clear: there is a whole bundle of reasons for the existence of Undeclared Work. Some causes are common to all EU-countries, some are rather country specific. Even the common reasons have a different weight in different countries. There is no country, where there is a unique reason for Undeclared Work.

Hence,

- there is not just one appropriate measure for each country, but a need for a whole bundle of measures (a policy mix),

- the policy mix must be different in different countries.

The Ragusa Conference has also provided a useful survey of measures already taken and their effectiveness. Most of these measures where aimed at a whole set of targets, most of them beyond Undeclared Work, but had at least some positive side effects concerning Undeclared Work. Some measures where specifically designed for fighting Undeclared Work. It turned out that there is also ample scope for specific regional solutions (e.g. Mezzogiorno) although in many cases there is also a clear EU-dimension.

“Emergence Policy”: (Italy) The Italian papers to the Ragusa Conference described the impressive project of fighting Undeclared Work in the Mezzogiorno, where cultural factors in the widest sense are of utmost impor-tance. The project includes the change of the regulatory environment, the improvement of government services, periods of transition, where preferencial

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tax regulations and wage rates are applied for those, who are willing to emerge from the shadow. Encouraging results have been obtained, although final conclusions on the project’s success cannot be drawn yet.

“Regulatory Reform”: For various countries changes in the regulatory environment, in particular for the labour market have shown positive results (e.g. in Spain). More flexible labour market rules make both lay-offs and hiring new declared labour less expensive and risky for companies.

Accelerated Economic Growth: Higher economic growth automatically extends the demand for Declared Work (e.g. Spain).

More Rigid Enforcement: Some countries (e.g. Sweden) also tend to increase public control activities and to apply new control methods (e.g. asset tracking). But there seems to be a clear limit to these measures: stricter enforcement would not only increase enforcement cost but - beyond a certain point - also bring unrest into society. Furthermore, Undeclared Work will probably not be shifted to the formal sector. Market forces would rather drive then expensive services out of business, lower income citizens could not afford services any more. Pressure on government to provide free services / subsidies would increase.

Tax Reform: The tax wedge between gross and net earnings is a common problem to all countries. Since stricter enforcement of tax laws has limits of its own, a clear strategy would be to reduce the tax and social security contributions burden on those economic activities, which can easily shift to the informal sector. As long as government expenses cannot be reduced at the same rate, new bases for taxes and social security contributions must be found and other bases be charged with higher tax rates (e.g. indirect taxes on tangible products, which cannot be easily produced in the informal sector). Moreover, financial incentives for the consumption of Declared Work could make Undeclared Work less attractive (e.g. service checks).

G. The European Community ContextThe Ragusa Conference Papers show very clearly the country specificity of Undeclared Work problems. Nevertheless, in reading the reports more closely it becomes quite clear that there is a definite EU-policy context in several respects:

The Italian Mezzogiorno example shows that an “Emergence Policy” must be part of a regional development policy, the design and funding of which cannot be done without the EU regulatory supervision and financial support. Transitory tax exemptions for emerging work which allow some flexibility could be considered as government aid and, therefore, need EU approval.

In open markets national tax reforms which imply major shifts between different tax bases cannot be done any more by individual countries independently. Most relevant tax bases are - at least to some extent - internationally mobile. Since the tax wedge problem is a common problem of practically all EU-countries a EU-coordinated reform of the tax system (but no harmonisation of tax rates) would be highly disirably.

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It is needless to say that economic growth promotion is an important EU-policy responsibility today. It remains to be seen, whether the policy instruments available at present are appropriate and efficient.

Labour supply and demand should be kept in a long run equilibrium thus ensuring adequate EU-wage levels, working conditions and safety standards in all lines of business. Therefore, loopholes in some EU-countries providing un-limited access of Third Country Labour to certain EU-industries should be stopped by EU-regulation. EU-enlargement should come with transitory periods for labour markets.

Continuous EU-economic analysis and benchmark activities must provide a common basis for both national and EU-policy reform reading Undeclared Work.

The global competitiveness of European companies has become one of the key concerns of the European Union. Within the next ten years Europe wants to become the world’s most competitive area. Hitherto, the issue of the internal competitiveness of the formal sector vis à vis the informal sector has rather been neglected, although there were some remarkable intitives by the European Parliament and the European Commission. At the same time informal work is one of the most urgent problems of European SMEs, any EU-SME policy without efficiently fighting undeclared work remains lip-service.

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ACKNOWLEDGEMENT

The research has been promoted by a group from organisations of different EU countries, members of UEAPME, namely: the Wirtschaftskammer Österreich of Austria, Confartigianato and the Confederazione Nazionale dell’Artigianato e delle Piccole Imprese of Italy, and has been supported by the Comitato Nazionale per l’emersione of the Italian Government and by the Chamber of Commerce and the Municipality of Ragusa.

The Comitato Nazionale per l’emersione has contributed to the research both its analysis and its experiences of activities aimed at highlighting the shadow economy in Italy.

Avignon Academy would like to thank the SMEs and Craft organisation promoters of the research, all the experts participating in the Ragusa workshop, the Chamber of Commerce and the Municipality of Ragusa, Gerhard Huemer of UEAPME for promoting the research to the European Commission, the two rapporteurs, Laura Tagle and Alexander Hofmann, Prof. Luca Meldolesi President of the Comitato Italiano per l’emersione, Prof. Werner Teufelsbauer, Director of the Scientific Committee of Avignon Academy, as well as Blando Palmieri for the organisation.

Particular thanks goes to the President and Secretary of CNA in Ragusa, Giuseppe Cascone and Giuseppe Tumino for the organisational support and kind hospitality.

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LIST OF EXPERTS PARTICIPATING IN THE RESEARCH

Prof. Prof. Liliana Bàculo, University of Napoli, Italy

Prof. Paolo Bonomi, University of Bologna, Italy

Dr. Alberto De Crais, CNA, Italy

Dr. Gerhard Huemer, UEAPME, Director for economic policy, Brussels

Dr. Henrik Jonsson, Finance Ministry, Sweden

Prof. Giuseppe Moro, University of Bari, Italy

Prof. Luca Meldolesi, President of the Comitato Nazionale per l’Emersione

Mr. Blando Palmieri, Avignon Academy

Dr. Francis Rawlinson, European Commission/DG Regio, Brussels

Mr. Piet Renooy, Regioplan, The Netherlands

Dr. Giorgio Russomanno, Confartigianato, Italy

Prof. Friedrich Schneider, University of Linz, Austria

Prof. Werner Teufelsbauer, WKÖ, Austria, Director of the Scientific Committee of the Avignon Academy

Prof. Joaquin Trigo Portela, University of Barcelona, Spain

Dr. Els van Winckel, European Commission/DG Employment, Brussels

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WHAT IS THE ACADEMY

Blando Palmieri

The “Avignon” Academy is the European research and high training body for SME and Craft enterprises. The Academy has been promoted by UEAPME and its member organisations in 1999 and is named after the French city Avignon, where the idea for the Academy was launched during the 1st European Conference on SMEs and Craft.

The scientific activities of the Avignon Academy are characterized by a multidisciplinary approach to the research, focusing on SMEs and craft, and by the added value of the European dimension to the research work .

A network of Scientific multidisciplinary research institutes in the EU Member States and the candidate countries (SCANet) supports the research activities which are conducted under the scheme of “cooperative research”.

A Scientific Electronic Journal for SMEs and craft publishing periodically quality research articles in the field of SMEs and Craft, under a multidisciplinary and European approach, is in the implementing phase.

Master classes, open to Directors of SME organisations, national civil servants, experts, social partners, and European institutions representatives are also part of the Academy programme to valorise the scientific research results.

The Avignon Academy is situated in Rue Jacques de Lalaing 4, 1040 Brussels. To contact the Avignon Academy Secretariat, please mail to the Secretariat: b.palmieri@ueapme.kmonet.be or phone 0032 2 2850709.

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Members of the Scientific Committee of the Avignon Academy

Prof. Johan BORTIERUNIZO, Belgium

Prof. Oriol HOMSPimec-Sefes, Spain

Prof. Deirdre HUNTNational University of Ireland in Cork, Ireland

Prof. Ovidiu NICOLESCUEconomic Academy in Bucharest, National Council of SMEs in Romania (CNIPMMR), Managers Institute in Bucharest, Romania

Prof. Lucio POMAUniversity of Bologna, Italy

Prof. Werner TEUFELSBAUERWirtschaftskammer Österreich (WKÖ), Austria

Members of the Administrative Council of the Avignon Academy

Mr. Dieter PhilippZentralverband des Deutschen Handwerks (ZDH), Germany

Mr. Pascal KneussAssemblée Permanente des Chambres de Métiers (APCM), France

Mr. Antonello PezziniConfederazione Generale Italiana dell’Artigianato (Confartigianato), Italy

Mr. Paul GillesChambre des Métiers d'Avignon, France

Mr. Bruno MeniniConfederazione Nazionale dell’Artigianato e delle Piccole e Medie Imprese (CNA), Italy

Mr. Kris PeetersComité National Belge des Petites et Moyennes Entreprises (CNBPME), Belgium

Prof. Werner TeufelsbauerWirtschaftskammer Österreich (WKÖ), Austria

Mr. Peter VesterdorfHåndværksrådet, Denmark

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ANNEXES

Interventions of the participants in the workshop “Shadow Economy: Empirical Evidences and New

Policy Issue at European Level” in Ragusa/Italy on 20/21 September 2002

The Shadow Economy: A common European Policy for a common Problem ?Prof. Werner Teufelsbauer, Director of the Scientific Committee of the Avignon Academy

The Size and Development of the Shadow Economies and Shadow Economy Labor Force of 21 OECD Countries: What do we really know?

Prof. Friedrich Schneider, University of Linz

The shadow economy in Italy: results from field studiesProf. Liliana Bàculo, University of Napoli

Policy for the Normalization of Shadow Employment in Spain - Analytical Framework, Measurements and Results*

Prof. Trigo, University of Barcelona Dpt, Teorìa Econòmicaò

Undeclared work in Sweden – results, recommendations and present policy issues Dr Henrik Jonsson, former expert of the Swedish National Audit Office

A common European policy from a diversity processProf. Giuseppe Moro University of Bari

The Annexes can be found on the website of the Avignon Academy: www.academyavignon.org

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