Poverty and the shadow economy: The role of governmental institutions
Document Type
Article
Publication Date
2020
Department/School
Economics
Publication Title
World Economy
Abstract
© 2020 John Wiley & Sons Ltd This paper examines the impact of poverty on the size of the shadow economy using cross-country panel data for over 100 countries for the period 1991–2015. The results show that poverty has a positive and significant effect on the size of the shadow economy. Furthermore, we argue that the quality and size of governmental institutions matter in moderating the impact of poverty on the shadow economy. Considering the interactions between poverty and government quality and size, we find that poverty has the largest effect on the size of the shadow economy when government quality is the lowest and the size of the government is the largest. These results withstand a battery of robustness checks.
Link to Published Version
Recommended Citation
Berdiev, A. N., Saunoris, J. W., & Schneider, F. (2020). Poverty and the shadow economy: The role of governmental institutions. The World Economy, 43(4), 921–947. https://doi.org/10.1111/twec.12917