Pages: 1113-1123 Published: 29 Aug 2014
Views: 2,498 Downloads: 784
Abstract: This study investigates the actual size and trend of the shadow economy in Ghana using the Multiple Indicator and Multiple Causes model. Results from the study show that direct tax rate, the size of government, unemployment rate, GDP per capita and total tax rates are the main causes of the shadow economy. An increase in direct taxes by a unit leads to an increase in the shadow economy by 0.4 units. Growth in the size of government by a unit leads to an increase in shadow economic activities by 0.48 units. A percentage point increase in unemployment leads to an increase in the shadow economy by 0.18 units. It declines by 0.006 units in the case of GDP per capita. The actual size of the shadow economy in Ghana stands around 32% of total economic activities in 2013.