Undeclared work: A dark side of social trust?

Abstract

A Eurobarometer survey from 2007 reports that most undeclared work in the EU 27 takes place in the three most high-trusting and non-corrupt countries—Denmark, Sweden and the Netherlands. This is somewhat surprising since social trust is normally associated with economic outcomes that are beneficial to society. The aim of this paper is to test whether undeclared work is a dark side of social trust. Since the Eurobarometer data may contain inaccurate self-reports on undeclared work and social trust may affect the willingness to provide truthful answers, we use more appropriate data in our test. Specifically, we use data from one single country (Danish Values Studies, 1999/2008) and undeclared work morale as an indicator of actual undeclared work—where undeclared work morale is the degree to which a person thinks undeclared work is wrong. We find a significant negative relationship between social trust and undeclared work morale after adjusting for a number of important controls. Thus, the evidence is in line with the bivariate picture of the Eurobarometer survey and suggests a dark side of social trust. We provide some initial explanations.