The Internet, economic uncertainty, and the shadow economy: “The Good, the Bad, and the Unknown”?

Abstract

This study investigates the influences of economic uncertainty and Internet usage on the informal economy. Notably, the study focuses on the effects of the association of economic uncertainty and Internet usage on the informal economy. The empirical analysis is carried out for a global sample of 124 economies from 1996 to 2017. Applying different estimates and different robustness checks, the results are consistent and robust. Internet usage leads to a decline in the shadow economy, while economic uncertainty has the effect of increasing the shadow economy. Interestingly, the positive influence of economic uncertainty on the shadow economy is likely exacerbated by Internet development. Lastly, analyses for several subsamples by time periods, income levels, and regions reveal additional findings. The negative impact of Internet usage on the shadow economy is consistent across income groups, regions, and time periods, except for a surprising positive impact in North America. The positive impact of economic uncertainty is also consistent in most income groups but more dominant in a period of low economic uncertainty. Interestingly, economic uncertainty is found to have a negative impact on the informal sector in low‐income economies and Sub‐Saharan Africa. Overall, the results have an important implication: Increases in economic uncertainty motivate economic agents to move to informal sectors, and this is supported by information technologies.

Does tourism reduce the shadow economy? An international evidence

“…The data related to the shadow economy were collected from Medina and Schneider [ 34 ]. Even though, there are debates over the reliability of the shadow economy's measurements since they are unobservable [ 62 ]; the method used in Medina and Schneider [ 34 ] has been recognized and applied in several previous studies [ [63] , [64] , [65] ].…”

Fintech applications in social welfare schemes during Covid times: An extension of the classic TAM model in India

“…2020; Milian et al. 2019; Nguyen, Nguyen, and Tran 2022). These services make transactions more secure, lower money transfer costs and promote asset creation and income flow smoothing (Asare et al.…”

“…This boosts productivity and probably lowers poverty. According to several academics, fintech helps the underprivileged by improving banking facilities (Alt, Beck, and Smits 2018;Arner et al 2020;Milian et al 2019;Nguyen, Nguyen, and Tran 2022). These services make transactions more secure, lower money transfer costs and promote asset creation and income flow smoothing (Asare et al 2022).…”

A new team and vision of the international social science journal

“…However, engaging with these technological advancements is not a requirement for publication; rather, we are open to any media and communications research that advances our methodological or theoretical knowledge. Two recent pioneering articles on the effects of social media and machine learning and the relationship between Internet usage and economic uncertainty were published in the ISSJ (Joshi & Patwardhan, 2023; Nguyen et al., 2023). This exemplary research outputs highlight ISSJ's commitment to furthering inter‐disciplinary theory and methods in these fields.…”