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- W2236007310 abstract "This paper examines the impact of corruption on the size of shadow economy. Unlike most of the previous literature, the paper accounts for the fact that some corrupt practices tend to be commonplace in some parts of the world, while other countries may be plagued by other types of corruption. First, a theoretical model is developed to show that bribes to get projects are likely to have different consequences with respect to shadow economy size than bribes that are paid to lower taxes. Second, the issue is examined empirically. Although cross-country data on different types of corruption are unavailable, an interaction term of the level of corruption and geography can capture differences in the consequences of corruption between countries. IV regressions and bootstrapping indicate that corruption does not affect shadow economy size outside tropics. Instead, the higher the tropical area fraction of a country, the more significant is the enlarging impact of a certain level of corruption on the size of shadow economy. Moreover, corruption and shadow economy seem to be substitutes in tropics, meaning that informal economic activities tend to increase, if corruption decreases. The result supports the conclusions drawn from the model. JEL Classification: C31, D73, O17." @default.
- W2236007310 created "2016-06-24" @default.
- W2236007310 creator A5049499713 @default.
- W2236007310 date "2007-01-01" @default.
- W2236007310 modified "2023-09-23" @default.
- W2236007310 title "Corruption and Shadow Economy: Differences in the Relationship between Countries" @default.
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