10.1057/s41302-018-0120-y">
 

Title

On the relationship between income inequality and the shadow economy

Document Type

Article

Publication Date

2019

Department/School

Economics

Publication Title

Eastern Economic Journal

Abstract

We empirically investigate the linkages between income inequality and the shadow economy. Employing a panel vector autoregression model, we build impulse response functions to study the time path of income inequality following a shock to the shadow economy, and vice versa. Our results using panel data for 144 countries over the period 1960–2009 reveal a bidirectional positive relationship between the two: specifically, higher income inequality promotes the spread of the shadow economy while the development of the shadow economy contributes to income inequality. Overall, these findings withstand a variety of robustness checks.

Link to Published Version

10.1057/s41302-018-0120-y

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