Corruption, Taxation and the Impact on the Shadow Economy

While assessing the economic impacts of corruption, corruption-related transmission channels which influence taxation as such have to be duly considered. Taking example Czech Republic, this article aims evaluate corruption has on size shadow economy well individual sources long-term growth, making use a channel through affects tax burden components. Using method an extended DSGE model, it confirms initial assumption that increase in perceived supports economy’s but at same time, demonstrates and especially its perception significantly different effect two key areas—the capital accumulation labour force size. It further identifies another sector representing taxes are prone evasion while asserting much more destructive economy, offering generalized implications for other post-communist EU member states similar situation.