Labor Laws and Shadow Economies: A Cross‐National Assessment

Blanton, Robert G.; Peksen, Dursun

doi:10.1111/ssqu.12685

Cited by 18 publications

(13 citation statements)

References 57 publications

(92 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The selection of the sample is exclusively based on data availability. Following Capasso and Jappelli (2013), Bittencourt et al (2014), Schneider et al (2019), and Blanton and Peksen (2019), we specify the following model:

\begin{matrix} left \\ infor m_{i t} = α_{0} + α_{1} \ln gdp p_{italicit} + α_{2} g d p g r_{i t} + α_{3} i {italicnf}_{i t} + α_{4} g c {}_{i t}+ α_{5} f d_{i t} + α_{6} \ln re m_{i t} \\ + α_{7} f d_{i t} x \ln re m_{italicit} + ε_{t} \end{matrix}

where inform it stands for the informal economy (% of official GDP) in country i at time t , ln gdpp , for GDP per capita (a proxy for the level of economic development), gdpgr it , for GDP annual growth rate (a proxy for economic performance), inf it for inflation rate (a proxy for macroeconomic stability), gc it for government consumption expenditures (% GDP) (a proxy for government size), fd it for financial development, ln rem it for remittances (personal remittances received in current US$), fd it × ln rem it for the interaction term between financial development and remittances and ε t for residual, respectively. GDP per capita and remittances are measured on a logarithmic scale.…”

Section: Model and Datamentioning

confidence: 99%

See 1 more Smart Citation

Do remittances moderate financial development–informality nexus in North Africa?

Akçay

Karabulutoğlu

2021

African Development Review

View full text Add to dashboard Cite

The prevalent informality and sheer size of international remittances characterize the North African countries. This study primarily aims at investigating how remittances moderate the effects of financial development on the informal economy in North African countries. Employing pool mean group (PMG)/panel ARDL approach and a balanced panel data set over the period 1980-2015, we find that remittances moderate the negative relationship between financial development and informal economy. This finding suggests that remittances bolster financial development, which, in turn, decreases the informal economy. Based on this result, we recommend that tailored policies and interventions are needed to promote financial development and international remittances in the North African region. 1 | INTRODUCTION Informality, or the informal economy, defined as "all economic activities by workers and economic units that are-in law or practice-not covered or insufficiently covered by formal arrangements" (OECD & ILO, 2019, p. 155), is a common issue that countries face all over the world, particularly developing countries. From the definition, it is clear that informality mainly manifests itself in production and employment. Indeed, according to Loayza (2016), over 70% of employment and 30% of production take place in the informal sector in a typical developing country. On a global scale, the informal economy accounts for 13% of world GDP, corresponding to US$10 trillion (Lewis, 2016). In terms of employment, two billion people, equivalent to about 62.1% of the working-age population, are informally employed in the world (ILO, 2018, p. 13). Finally, OECD and ILO (2019) estimates that 81% of all enterprises operate in the informal sector in the world. High levels of informal economy place an increasing strain on the formal economy and impede economic development and inclusive economic growth, particularly in developing countries. That said, the informal economy adversely affects a developing economy in several ways. First, it erodes the tax base and therefore undermines fiscal sustainability (

show abstract

\begin{matrix} left \\ infor m_{i t} = α_{0} + α_{1} \ln gdp p_{italicit} + α_{2} g d p g r_{i t} + α_{3} i {italicnf}_{i t} + α_{4} g c {}_{i t}+ α_{5} f d_{i t} + α_{6} \ln re m_{i t} \\ + α_{7} f d_{i t} x \ln re m_{italicit} + ε_{t} \end{matrix}

Section: Model and Datamentioning

confidence: 99%

“…Turning to the impact of explanatory variables on the informal economy, GDP per capita as a proxy for the level of economic development mitigates informality (Bittencourt et al, 2014; Blanton & Peksen, 2019), thereby its coefficient is expected to be negative.…”

Section: Model and Datamentioning

confidence: 99%

Do remittances moderate financial development–informality nexus in North Africa?

Akçay

Karabulutoğlu

2021

African Development Review

View full text Add to dashboard Cite

show abstract

“…The interplay between financial crises and the growth of the shadow sector connoted by historical institutionalism are similar to institutional incongruence theories of the shadow sector. In this perspective, the growth of the shadow economy is viewed as driven by an incongruence or "asymmetry between formal and informal institutions" (Williams et al, 2015:295; see also Williams, 2019;Blanton and Peksen, 2019). More specifically, if the formal market institutions and regulatory structures begin to lose legitimacy among economic actors, they will increasingly consider entry into the informal economy as a viable and legitimate option.…”

Section: Temporary Fix or Lasting Change? The Persistent Impact Of Crisesmentioning

confidence: 99%

A Global Analysis of Financial Crises and the Growth of Informal Economic Activity

Blanton

Peksen

2021

Social Science Quarterly

Self Cite

View full text Add to dashboard Cite

Objective. Though a large body of work has focused on how financial crises impact the formal economy, scant research has explored how financial crises affect informal economic activity. Methods. We analyze data on informal economies and multiple types of financial crises for 143 countries for the years spanning 1970 to 2011. Results. Banking and debt crises have both immediate and lingering positive effects on the shadow economic growth. Currency crises are also positively associated with shadow economy growth, but the effect is likely to be short-lived with no major lingering impact following the initial year of the crisis. Conclusion. We uncover a complex dynamic between financial crises and the growth of the informal economy, with an implication being that crises may result in a sustained movement of labor and capital out of the formal economy.How do financial crises impact the informal economy? While financial crises are not new to the global economy, they have increased in frequency. Reinhart and Rogoff (2009), for instance, estimate that over 1,600 crises have occurred since 1976. Financial crises impose massive economic and political costs on states, including economic contractions, increased unemployment, political instability, and diminished personal well-being (e.g., Blanton,

show abstract

“…Previous studies have found many determinants of the shadow economy, including unemployment [ 7 , 8 ]; tax burden [ 9 , 10 ]; corruption [ 11 – 13 ]; trade openness or globalization [ 14 ]. However, our literature review indicates that the relationship between national intellectual capital and shadow economy has largely been neglected in existing empirical studies.…”

Section: Introductionmentioning

confidence: 99%

Does national intellectual capital matter for shadow economy in the Southeast Asian countries?

Tran

Nguyen

et al. 2022

PLoS ONE

View full text Add to dashboard Cite

Understanding the determinants of the shadow economy plays a vital role in formulating policies for economic growth and development, particularly for the Southeast Asian countries–a new economic force for a global economy. The key drivers of a shadow economy, such as institutional quality, taxation, government expenditure, are widely examined. However, the effect of national intellectual capital, which affects macroeconomic indicators, on the shadow economy has largely been ignored in the existing literature. Our paper examines this critical link and its causality relationship for eight Southeast Asian countries from 2000 to 2017. This paper uses the dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS), which allow cross-sectional dependence and slope homogeneity in panel data analysis. Empirical findings from this paper indicate that national intellectual capital impacts negatively and significantly the shadow economy size. This finding implies that enhancing national intellectual capital reduces the shadow economy size. These two forces lead to enhanced economic growth. Our Granger causality tests confirm a bi-directional relationship between national intellectual capital and the shadow economy. As a result, policies targeted to reduce the shadow economy size can now include the accumulation of national intellectual capital, particularly for Southeast Asian Countries.

show abstract

Labor Laws and Shadow Economies: A Cross‐National Assessment

Cited by 18 publications

References 57 publications

Do remittances moderate financial development–informality nexus in North Africa?

Do remittances moderate financial development–informality nexus in North Africa?

A Global Analysis of Financial Crises and the Growth of Informal Economic Activity

Does national intellectual capital matter for shadow economy in the Southeast Asian countries?

Contact Info

Product

Resources

About