Nonlinearity Between the Shadow Economy and Level of Development

Wu, Dong; Schneider, Friedrich

doi:10.5089/9781484399613.001

Cited by 17 publications

(16 citation statements)

References 14 publications

(30 reference statements)

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“…This result confirms that in the majority of these OECD member countries, sustainable economic growth is a main long‐run determinant, which disrupts the presence of the shadow economy. This finding is affirmation of Wu and Schneider's (2019) empirical study showing the non‐linear long‐run relationship of the shadow economy and economic growth (GDP per capita) for 158 countries over the period of 1996–2015. Simultaneously, the authors confirm that outstanding economic growth and development have a significant negative impact on the shadow economy.…”

Section: The Empirical Resultssupporting

confidence: 77%

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

Hajilee

Niroomand

Hayes

2023

Australian Economic Papers

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Interest rate changes by central banks are a strong monetary policy tool that has a significant impact on the performance of the real economy via various channels. Despite extensive theoretical and empirical studies in this area, the current literature lacks a comprehensive assessment of the relationship between interest rate volatility and the shadow economy. This study explores the link between interest rate volatility and the shadow economy for 38 Organisation for Economic Co‐operation and Development (OECD) member countries over the period 1991–2021 using both linear and non‐linear ARDL models. The use of the non‐linear ARDL specification will allow for the possibility of an asymmetric effect of interest rate volatility on the shadow economy. In addition to the examination of the potential asymmetric effects, we also discuss the ramifications for policymakers with respect to monetary and financial policies while considering each country's specific economic structure.

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Section: The Empirical Resultssupporting

confidence: 77%

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

Hajilee

Niroomand

Hayes

2023

Australian Economic Papers

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“…Thus, an improved level of development for high income countries rises the level of economic and financial crime. Despite the fact that these findings contradict our expectations they are in line with those of Caselli and Michaels (2013) and Wu and Schneider (2019). The results may be explained through the findings of Wu and Schneider (2019) who detect a Ushaped relation between the size of the shadow economy and the GDP per capita.…”

Section: Economic and Financial Crime (Csl)contrasting

confidence: 86%

“…Despite the fact that these findings contradict our expectations they are in line with those of Caselli and Michaels (2013) and Wu and Schneider (2019). The results may be explained through the findings of Wu and Schneider (2019) who detect a Ushaped relation between the size of the shadow economy and the GDP per capita. Therefore, the researchers prove that the shadow economy tends to expand when the economy surpasses a given development threshold.…”

Section: Economic and Financial Crime (Csl)contrasting

confidence: 86%

“…However, for developed countries we validate a positive impact of economic development upon the economic and financial crime, meaning that boosted economic development creates incentives for breaking the law and getting benefits. Thus, when financial satisfactions are very high and one person may cover all the expenses of his/her family, the remaining family members may choose to work in the shadow due to the flexibility of informal work, fiscal advantages or other benefits (Wu & Schneider, 2019). These high income economies often dispose of many natural resources like oil and the occurrence of frauds and oil-related frauds are well known and widespread (Vicente, 2010;Caselli & Michaels, 2013;Wu & Schneider, 2019).…”

Section: Discussionmentioning

confidence: 99%

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Does Technology Matter for Combating Economic and Financial Crime? A Panel Data Study

Achim

Borlea

Văidean

2021

Technological and Economic Development of Economy

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In this paper we analyze the influence of technology on the level of the economic and financial crime, using data for 185 countries over the 2012–2015 time period and controlling for many important variables. First, we find that on average, the size of the economic and financial crime in low income countries is about double compared to that of high income countries, while their Research and development expenditure (as % of GDP) are about four times lower than in high income countries. We find clear evidence that increased technology reduces the size of the economic and financial crime. In addition, we find that Research and development expenditure (% of GDP) matter more in reducing the economic and financial crime in low income countries than they do in high income countries. Our main findings are generally stable after conducting some robustness checks. From a policy perspective, our study may prove to be of great use to decision makers of the states, to government and non-governmental enterprises and to potential investors within different markets.

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“…Hassan and Schneider (2016) and Schneider (2011) are other authors who find that the size of the informality diminishes with an increase in GDP growth. On the contrary, Zaman and Goschin, 2015;Wu and Schneider (2019) find the opposite; therefore, the effect of growth on informality is inconclusive and mixed.…”

Section: Datamentioning

confidence: 95%

Kayıt Dışı Ekonomi ve Finansal Gelişme: Kurumların Rolü

BULUT

2023

Sosyoekonomi

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This paper assesses the interactive impact of financial development and institutional quality indicators on the informal economy using data from 67 developing countries from 2002-2017. We employ the fixed-effect model with Driscoll-Kraay standard errors that are heteroscedasticity consistent and robust to the general form of cross-sectional and temporal dependence. Findings reveal that financial development and institutions are substitutes for reducing the informal economy. Financial development decreases the size of the informal economy only in the absence of efficient institutions and vice versa. Finally, the study provides several essential policy suggestions for combatting the informal economy.

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Nonlinearity Between the Shadow Economy and Level of Development

Cited by 17 publications

References 14 publications

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

Does Technology Matter for Combating Economic and Financial Crime? A Panel Data Study

Kayıt Dışı Ekonomi ve Finansal Gelişme: Kurumların Rolü

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