1 The shadow economy : a challenge for economic and social policy

In the 1980s, the causes, effects, and problems generated by increasing shadow economic activities were extensively and controversially discussed inmany countries, especially in theOECD. In the 1990s, attention was being drawn to the shadow economy because of dramatically rising unemployment (e.g., in the European Union) and the problems of financing public expenditure, as well as the rising anxiety and disappointment about economic and social policies. Public discussion of illicit work, tax evasion, and all the other activities in the shadow economy have grown increasingly pointed even beyond the turn of the millennium. Broad initiatives on behalf of the EU Commission and EU Parliament, as well as at state level, show that politicians have finally felt the need to act as well. Politicians are in a dilemma. While the fact that the wealthy are evading taxes leads to widespread public indignation, illicit workers are often much less criticised, although some politicians argue that they are behaving antisocially and are a source of growing unemployment and social injustice. This opinion is broadly shared in regard to social fraud, illegal employment, and extensive tax evasion. But what about part-time illicit work in the evening (‘moonlighting’), which, for example, about half of the population inGermanywould tolerate, or even take advantage of, if they had the opportunity to do so? Can more sanctions and controls, combined with more regulation, be the ultimate solution to combat illicit work?What is the right way to deal with undeclared work? In the popular scientific media and in newsprint, this discussion naturally does not go into detail. Here, judgement on the nature of the