Exploring the dynamics of the shadow economy across US states

Authors

Aziz N. Berdiev
Cullen Pasquesi-Hill
James W. Saunoris, Eastern Michigan UniversityFollow

Document Type

Article

Publication Date

2015

Department

Economics

Abstract

This article examines the dynamics of the shadow economy using data for 50 US states over the period 1998-2008. Using a panel VAR model, we analyse the impulse response of the shadow economy to an orthogonal shock in capital tax rates, educational attainment, union participation and gross state product. We find evidence of significant dynamics underlying the relationship between the shadow economy and its determinants. The results remain robust to alternate measures of the determinants of the shadow economy, alternate causal ordering of the variables in the system and conditioning on the level of income in each state. Reprinted by permission of Routledge, Taylor and Francis Ltd.

DOI

10.1080/00036846.2015.1064081

Citation

Berdiev, A. N., Pasquesi-Hill, C., & Saunoris, J. W. (2015). Exploring the dynamics of the shadow economy across US states. Applied Economics, 47(56), 6136–6147. doi:10.1080/00036846.2015.1064081