Institutionalized democracy and the shadow economy in the short- and long-run: empirical analysis from Uganda

Esaku, Stephen

doi:10.1057/s41599-022-01128-1

Cited by 4 publications

(4 citation statements)

References 39 publications

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“…Similarly, democracy is shown to be an important indicator of the shadow economy. Extant literature shows that improvement in democracy significantly reduces the size of the shadow economy (Esaku 2022; Goel et al. 2019; Teobaldelli and Schneider 2013).…”

Section: Methodsmentioning

confidence: 99%

The shadow economy and education in Uganda: Is there a long‐run relationship?

Esaku

Mugoda

2023

Int Social Sci J

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Using time series data from Uganda covering the period from 1991 to 2017, this paper applies autoregressive distributed lag bounds testing approach to examine the long‐ and short‐run relationship between education and the shadow economy. We find evidence of the long‐run relationship. The results indicate that an increase in both primary and secondary school enrolment significantly reduce the size of the shadow economy in the long run, all else equal. The above relationship is robust to alternative specification and estimation methods. We also uncover bidirectional causal relationship between education and the shadow economy. In the short run, increased school enrolment reduces the shadow economy but in an insignificant manner. At the policy level, the existence of a negative relationship between education and the shadow economy suggests that mitigating informality requires reforming education system to address issues of quality. Additionally, addressing informality may require improving the economic and financial environment so that the needs and obstacles faced by individuals and or businesses are handled. Furthermore, reforming the political and institutional environment may go a long way into mitigating the expansion of the shadow economy in Uganda and Africa in general.

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Section: Methodsmentioning

confidence: 99%

The shadow economy and education in Uganda: Is there a long‐run relationship?

Esaku

Mugoda

2023

Int Social Sci J

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“…Similarly, the sector contributed approximately 62.9 percent of Bolivia's gross domestic product, and approximately 62% of Georgia's and Europe's gross domestic product, respectively (Medina and Schneider, 2019). These statistics demonstrated the importance of the shadow economy to these countries, and also envisioned it as a means to improve the livelihood of certain income brackets (Esaku, 2022). However, the growth of the shadow economy is often described as a limiting agent of economic growth (Esaku, 2021a), exacerbating income inequality (Esaku, 2021b), and encouraging tax evasion (Buehn and Schneider, 2012).…”

Section: Introductionmentioning

confidence: 92%

Modelling the nexus between income inequality and shadow economy in Nigeria

Adegboyega

Odusanya

Ogede

et al. 2022

JED

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Purpose -This paper aims to examine the relationship between the shadow economy and income inequality in Nigeria.Method -The paper employed Autoregressive Distributed Lag (ARDL), Fully Modified Ordinary Least Square (FMOLS), and Granger causality. This methodology is used to avoid endogeneity and heterogeneity in the model. This paper gauged income inequality using two diverse indicators of the Gini coefficient: the Gini index in proportion to household disposable income and the Gini index in proportion to household market income. In accordance with the literature, our empirical analysis draws on data from the Standardized World Income Inequality Database (SWIID), the World Bank, World Development Indicators, and the International Country Risk Guide (ICRG) for Nigeria from 1991 to 2018.Result -The findings of ARDL and FMOLS suggested a positive relationship between income inequality and the shadow economy, based on both measures of income inequality. In the short term, however, the shadow economy and income inequality are negatively correlated. Furthermore, we discovered a one-way causal relationship exists in Nigeria between the shadow economy, household disposable income, institutional democracy, household market income, and corruption control (CCI). Recommendation -Shadow economy has been regarded as an avenue to create job opportunities and raise poverty-income levels. It is critical that, for the shadow economy to reduce income inequality in Nigeria, policymakers should develop much better policies aimed at addressing income inequality.Contribution -In order to understand the relationship between income inequality and shadow economy activities in Nigeria, this study employed three methodologies, namely: Autoregressive Distributed Lags (ARDL), Fully Modified Ordinary Least Squares (FMOLS), and Granger Causality. The result offers reliable recommendations for pro-poor interventions that aim to limit the growth of informality via redistributing incomes.

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“…Recent research by Esaku (2022) argued that increasing foreign trade exposure drastically reduces the shadow economy. As economies integrate more fully into the global economy in order to profit from global marketplaces, this may imply that enterprises and individual entrepreneurs are encouraged to engage in the formal sector.…”

Section: Literature Reviewmentioning

confidence: 99%

Disaggregated Trade Openness on Shadow Economy in Nigeria: Does Institutional Quality Matter?

Adegboyega

Ogede

Odusanya

et al. 2022

JEBA

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Introduction: It is likely that enterprises and entrepreneurs will be encouraged to engage in the formal sector as economies integrate more fully into the global economy. Thus, we begin our investigation by looking at the relationship between Nigeria's shadow economy and disaggregated trade openness. Based on Nigeria's inadequate institutional quality, our second purpose is to conduct further research on the role institutional quality plays in moderating the relationship between its shadow economy and disaggregated trade openness between 1991 and 2018. Methods: The fully modified ordinary least squares (FMOLS) and Granger causality methods are used in this paper to investigate the nexus and causal effect in time-series analysis. Results: The coefficients of institutional quality, import-to-GDP ratio, government expenditure, and financial development all have an adverse impact on Nigeria's shadow economy. The inflation proxy with the consumer price index, economic growth, and the export-to-GDP ratio all improve Nigeria's shadow economy. The findings of interaction between the import-export ratio and the quality of institutions positively affect the Nigerian shadow economy. The pairwise Granger causality exercise comes after the regression analysis. Conclusion and suggestion: The study concludes that the size of Nigeria's shadow economy is influenced by institutional quality, import trade, government expenditures, and financial development. Similarly, we find no causal relationship between disaggregated trade openness in Nigeria and institutional quality. As a result, policymakers and the country's government must act quickly and decisively to reduce the impact of informal activities on the country's economy.

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Institutionalized democracy and the shadow economy in the short- and long-run: empirical analysis from Uganda

Cited by 4 publications

References 39 publications

The shadow economy and education in Uganda: Is there a long‐run relationship?

The shadow economy and education in Uganda: Is there a long‐run relationship?

Modelling the nexus between income inequality and shadow economy in Nigeria

Disaggregated Trade Openness on Shadow Economy in Nigeria: Does Institutional Quality Matter?

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