View More View Less
  • 1 Beaconhouse National University Department of Economics, Seeta Majeed School of Liberal Arts and Social Sciences Lahore Pakistan
Restricted access

Purchase article

USD  $25.00

1 year subscription (Individual Only)

USD  $700.00

One factor that contributes in the size of the shadow economy is the regulation of business activities. This paper provides empirical analysis of the effects of regulatory discretion on the unofficial economy. It adds to the previous findings by gathering evidence from a large data set of 162 countries for the 1999 to 2007 period. Going beyond simple correlation, it uses the Arellano-Bond estimator to investigate the dynamics and causal effects of regulation on the shadow economy. We find that increase in regulation increases the size of the shadow economy.

  • Anderson, J.E. (2012): Efficient Policy in a Predatory Economy: To Whom Who Hath Shall be Given? International Economic Review, 53(1): 157–174.

    Anderson J.E. , 'Efficient Policy in a Predatory Economy: To Whom Who Hath Shall be Given ' (2012 ) 53 International Economic Review : 157 -174.

    • Search Google Scholar
  • Arellano, M. — Bond, S. (1991): Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations. Review of Economic Studies, 58(2): 277–297.

    Bond S. , 'Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations ' (1991 ) 58 Review of Economic Studies : 277 -297.

    • Search Google Scholar
  • Beck, N.L. — Katz, J.N. (1995): What to Do (and not to Do) with Time-Series Cross-Section Data. American Political Science Review, 89(3): 634–647.

    Katz J.N. , 'What to Do (and not to Do) with Time-Series Cross-Section Data ' (1995 ) 89 American Political Science Review : 634 -647.

    • Search Google Scholar
  • Blackburn, K. — Powell, J. (2011): Corruption, Inflation and Growth. Economics Letters, 113(3): 225–227.

    Powell J. , 'Corruption, Inflation and Growth ' (2011 ) 113 Economics Letters : 225 -227.

  • Buehn, A. — Schneider, F. (2012): Corruption and the Shadow Economy: Like Oil and Vinegar, like Water and Fire? International Tax Public Finance, 19(1): 172–194.

    Schneider F. , 'Corruption and the Shadow Economy: Like Oil and Vinegar, like Water and Fire ' (2012 ) 19 International Tax Public Finance : 172 -194.

    • Search Google Scholar
  • Choi, J. — Thum, M. (2005): Corruption and the Shadow Economy. International Economic Review, 46(3): 817–836.

    Thum M. , 'Corruption and the Shadow Economy ' (2005 ) 46 International Economic Review : 817 -836.

    • Search Google Scholar
  • Dabla-Norris, E. — Gradstein, M. — Inchauste, G. (2008): What Causes Firms to Hide Output? The Determinants of Informality. Journal of Development Economics, 85(1–2): 1–27.

    Inchauste G. , 'What Causes Firms to Hide Output? The Determinants of Informality ' (2008 ) 85 Journal of Development Economics : 1 -27.

    • Search Google Scholar
  • Dreher, A. — Kotsogiannis, C. — McCorriston, S. (2009): How do Institutions Affect Corruption and the Shadow Economy? International Tax and Public Finance, 16(6): 773–796.

    McCorriston S. , 'How do Institutions Affect Corruption and the Shadow Economy ' (2009 ) 16 International Tax and Public Finance : 773 -796.

    • Search Google Scholar
  • Dreher, A. — Schneider, F. (2010): Corruption and the Shadow Economy: An Empirical Analysis. Public Choice, 144(1–2): 215–238.

    Schneider F. , 'Corruption and the Shadow Economy: An Empirical Analysis ' (2010 ) 144 Public Choice : 215 -238.

    • Search Google Scholar
  • Guha-Khasnobis, B. — Kanbur, R. — Ostrom, E. (2006): Beyond Formality and Informality. In: Guha- Khasnobis, B. — Kanbur, R. — Ostrom, E. (eds): Linking the Formal and Informal Economy: Concepts and Policies. New York: Oxford University Press, pp. 1–9.

    Ostrom E. , '', in Linking the Formal and Informal Economy: Concepts and Policies , (2006 ) -.

  • Hibbs, D.A. Jr. — Piculescu, V. (2005): Institutions, Corruption and Tax Evasion in the Unofficial Economy. Public Economics, 08(2): 1–29.

    Piculescu V. , 'Institutions, Corruption and Tax Evasion in the Unofficial Economy ' (2005 ) 08 Public Economics : 1 -29.

    • Search Google Scholar
  • Hindrik, J. — Keen, M. — Muthoo, A. (1999): Corruption, Extortion and Evasion. Journal of Public Economics, 74: 395–430.

    Muthoo A. , 'Corruption, Extortion and Evasion ' (1999 ) 74 Journal of Public Economics : 395 -430.

    • Search Google Scholar
  • Ihrig, J. — Moe, K.S. (2004): Lurking in the Shadows: The Informal Sector and Government Policy. Journal of Development Economics, 73(2): 541–557.

    Moe K.S. , 'Lurking in the Shadows: The Informal Sector and Government Policy ' (2004 ) 73 Journal of Development Economics : 541 -557.

    • Search Google Scholar
  • Johnson, S. — Kaufmann, D. — Shleifer, A. (1997): The Unofficial Economy in Transition. Brookings Papers on Economic Activity, 2: 159–239.

    Shleifer A. , 'The Unofficial Economy in Transition ' (1997 ) 2 Brookings Papers on Economic Activity : 159 -239.

    • Search Google Scholar
  • Johnson, S. — Kaufmann, D. — Zoido-Lobatón, P. (1998): Regulatory Discretion and the Unofficial Economy. American Economic Review, 88(2): 387–392.

    Zoido-Lobatón P. , 'Regulatory Discretion and the Unofficial Economy ' (1998 ) 88 American Economic Review : 387 -392.

    • Search Google Scholar
  • Kaufmann, D. — Kraay, A. — Mastruzzi, M. (2010): The Worldwide Governance Indicators: Methodology and Analytical Issues. World Bank Policy Research Working Paper, No. 5430.

    Mastruzzi M. , '', in The Worldwide Governance Indicators: Methodology and Analytical Issues , (2010 ) -.

  • Koreshkova, A.T. (2006): A Quantitative Analysis of Inflation as a Tax on the Underground Economy. Journal of Monetary Economics, 53(4): 773–796.

    Koreshkova A.T. , 'A Quantitative Analysis of Inflation as a Tax on the Underground Economy ' (2006 ) 53 Journal of Monetary Economics : 773 -796.

    • Search Google Scholar
  • Laoyza, N.V. (1996): The Economics of the Informal Sector: A Simple Model and Some Empirical Evidence from Latin America. Carnegie-Rochester Conference Series on Public Policy, 45: 129–162.

    Laoyza N.V. , 'The Economics of the Informal Sector: A Simple Model and Some Empirical Evidence from Latin America ' (1996 ) 45 Carnegie-Rochester Conference Series on Public Policy : 129 -162.

    • Search Google Scholar
  • Mazhar, U. — Méon, P-G. (2013): Taxing the Unobservable: The Impact of the Shadow Economy on Inflation and Taxation. Working Papers, CEB 12-023. Available at http://ideas.repec.org/p/sol/wpaper/2013-125005.html

    Méon P.-G. , '', in Taxing the Unobservable: The Impact of the Shadow Economy on Inflation and Taxation , (2013 ) -.

  • Roubini, N. — Salai-i-Martin, X. (1995): A Growth Model of Inflation, Tax Evasion, and Financial Repression. Journal of Monetary Economics, 35(2): 275–301.

    Salai-i-Martin X. , 'A Growth Model of Inflation, Tax Evasion, and Financial Repression ' (1995 ) 35 Journal of Monetary Economics : 275 -301.

    • Search Google Scholar
  • Schneider, F. — Buehn, A. — Montenegro, C.E. (2010): Shadow Economies all over the World: New Estimates for 162 Countries from 1999–2007. World Bank Policy Research Working Paper, No. 5356.

    Montenegro C.E. , '', in Shadow Economies all over the World: New Estimates for 162 Countries from 1999–2007 , (2010 ) -.

  • Végh, C.A. (1989): Government Spending and Inflationary Finance: A Public Finance Approach. International Monetary Fund Staff Papers, 36(3): 657–677.

    Végh C.A. , 'Government Spending and Inflationary Finance: A Public Finance Approach ' (1989 ) 36 International Monetary Fund Staff Papers : 657 -677.

    • Search Google Scholar