Effects of Foreign Direct Investment and Quality of Informal Institution on the Size of the Shadow Economy: Application to Vietnam

Ngọc, Bùi Hoàng

doi:10.13106/jafeb.2020.vol7.no5.073

Cited by 8 publications

(8 citation statements)

References 50 publications

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“…The higher the tax rate is, the higher is the tax burden on the companies participating in the open economy and more and more people would be trying to take the eyes of the tax authorities away from their business by moving it into the shadow economy. Similar to FDIdespite all its insignificance in the article by the Vietnamese authors, the article by Ngoc (2020) shows that FDI can affect the volume of shadow economy negatively. Regression equation uses logarithm of total volume of FDIs and index of human capital per capita.…”

Section: Introductionmentioning

confidence: 73%

Econometric analysis of influence by the factors on the volume of shadow economy in the countries of Europe

Kravchenko

Karapetov

Nechepurenko

2022

JFC

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Purpose This study aims to identify the factors which influence the change in the volume of shadow economy in the countries of Europe to explain its growth or reduction through the change in the identified factors. This would help to determine which factors are worth impacting to reduce the volume of shadow economy in the countries of Europe. Design/methodology/approach This work sets out an econometric analysis. For the purpose of making research calculations, MS Excel software package has been chosen. It has been decided to use linear multiple regression and several auxiliary tools allowing research accuracy to be increased. Findings Final model has shown that the levels of corruption and inflation have a positive effect on the volume of shadow economy. Also, with the low level of significance it has been proved that foreign direct investments have a negative impact on the volume of shadow economy. From the hypotheses, it has also been ascertained that the rule of law and gross domestic product influence the volume of shadow economy negatively. Therefore, the results of this study indicate that the magnitude of shadow economy can be controlled by increasing the efficiency of the rule of law and the economy’s growth. Research limitations/implications Because of the limited data on such an indicator as the shadow economy, in this work, this study used data for only one year – 2015, which may reduce the objectivity and reliability of the results obtained. But because of the fact that 38 European countries were taken and, as a result, the selection was larger, objectivity is preserved. As a result, three hypotheses were confirmed. Practical implications From the point of view of practical implications, this study should help determine the number of parameters, which affect the volume of the shadow economy in a particular country in Europe. Understanding of such correlations will help to regulate the volume of the shadow economy, which will mostly affect the overall development of the country. Social implications From a point of view of social implications, this study will help to solve some problems in Europe countries. Because this study is focused on finding parameters that affect the shadow economy, it is possible to reduce the volume of shadow economy. This changes can lead to a number of social improvements, such as a reduction of crime, a reduction of poverty, a reduction of unemployment, an increase of revenues to the country's treasury and a general increase of living standards. Originality/value Within the framework of this work, unique empirical research has been undertaken. This work helps to establish the factors which are the most influential in respect of the volume of shadow economy and which graphically indicate the following: what precisely needs to be prioritized to overcome one of the crucial socioeconomic problems for the majority of European countries.

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Section: Introductionmentioning

confidence: 73%

Econometric analysis of influence by the factors on the volume of shadow economy in the countries of Europe

Kravchenko

Karapetov

Nechepurenko

2022

JFC

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“…However, the presence of informal sector composition in the labour market may deter institutional quality. Further, a stronger informal sector composition in the labour market may practice tax evasion and hinder the tax revenue of the government leading to being incapable to develop infrastructure, which also deters the quality of infrastructure though it is seen as a potential pulling factor of FDI (Hoang, 2020).…”

Section: Relationship Between Fdi and Informal Sectormentioning

confidence: 99%

The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka

Bhavan

2023

South Asia Economic Journal

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The purpose of this study is to investigate the bilateral relationship among formal, informal and foreign direct investment (FDI) in the case of Sri Lanka during the period from 1990 to 2019. Using annual time series data, the Two Stage Least Square method is employed to investigate the relationship among the endogenous variables. The results derived from the analysis suggest that the integration between formal and informal sectors and formal sector and FDI are positive and have significant impacts on each other. However, the negative and significant impacts of the informal sector and FDI on each other further suggest that the integration between the informal sector and FDI did not give an optimistic signal to the country to contemplate that the informal sector is supporting foreign investors. At the same time, a sign that FDI discourages informal sector progression in the results has triggered the attention of further investigations on whether foreign investment agglomeration in Sri Lanka promotes informal-formal sectoral transformation at the cost of the informal sector. However, this study proposes an interest in sound policy requirements to reshape the informal sector towards the interest of foreign direct investors and informal-formal sector transformation. JEL Codes: E26, F21, J21, J46

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“…There is a massive impact of FDI on the economic structure of the host country. The majority of administrators and economic researchers is believed that FDI leads to an increase in exports, rises in the level of living standards, less unemployment, improving the balance of payments, and provides some other welfares (Borensztein et al, 1998;Carkovic & Levine, 2002;Hussain & Haque, 2016;Ngoc, 2020). Alfaro et al (2004Alfaro et al ( , 2010 inspect the influences of multinational companies on the host country.…”

Section: The Interaction Between Foreign Direct Investment and Econommentioning

confidence: 99%

Do Foreign Direct Investment, Energy Consumption and Urbanization Enhance Economic Growth in Six ASEAN Countries?

Long¹

2020

JAFEB

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The neoclassical economic supporters have suggested that foreign direct investment and raw material (e.g., coal, electricity, gas, and oil) are critical economic growth inputs. Few previous studies have analyzed the relationship between foreign direct investment and energy consumption on economic growth. However, existing studies usually have applied the frequentist inference. The limitation of the frequentist inference is that, if the coefficient of the independent variable is not yet significant, then conclusions might be unreliable. By applying the Bayesian approach, the main aim of this study is to revisit the impact of foreign direct investment, electricity consumption, and urbanization on economic growth in six ASEAN countries from 1980 to 2016. The obtained outcome shows that the impact of electricity consumption is evident and positive on economic growth in both frequentist and Bayesian inferences. However, the influence of foreign direct investment is not identified by frequentist inference, while Bayesian inference provides evidence that foreign direct investment is a moderately positive impact on economic growth. The empirical result from Bayesian inference contributes to the literature on foreign direct investment modeling and could be of significant importance for a more efficient foreign direct investment attracting and achieve sustainability in the long-term.

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Effects of Foreign Direct Investment and Quality of Informal Institution on the Size of the Shadow Economy: Application to Vietnam

Cited by 8 publications

References 50 publications

Econometric analysis of influence by the factors on the volume of shadow economy in the countries of Europe

Econometric analysis of influence by the factors on the volume of shadow economy in the countries of Europe

The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka

Do Foreign Direct Investment, Energy Consumption and Urbanization Enhance Economic Growth in Six ASEAN Countries?

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