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U.S. Shadow Economies, Corruption, and Entrepreneurship: State-level Spatial Relations

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  • Wiseman, Travis

Abstract

This paper offers a new theory of relationship between corruption and the shadow economy, one that defines it as either collusive – i.e., crony – or non - collusive. Using new estimates of state - level shadow economy size and data on corruption convictions of U.S. public officials for the 48 contiguous states, this study revisits this relationship empirically, controlling for spatial dependence. Additionally, the relationship between entrepreneurship and cronyism is investigated using productive entrepreneurship scores from Wiseman and Young (2014). Findings suggest that corruption and shadow economy size are positively related and both contagious and cross - contagious in the U.S. states. These results are fairly robust to several methods of spatial modeling. Results also reveal that productive entrepreneurship is contagious across states. Finally, this study attempt s to draw a linkage among formal sector entrepreneurial outcomes, corruption, and the shadow economy using spatial GMM/IV modeling in an entrepreneurship regression.

Suggested Citation

  • Wiseman, Travis, 2016. "U.S. Shadow Economies, Corruption, and Entrepreneurship: State-level Spatial Relations," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    • Handle: RePEc:ags:jrapmc:262588
    DOI: 10.22004/ag.econ.262588
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    References listed on IDEAS

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    Cited by:

    1. Larissa Batrancea & Anca Nichita & Ioan Batrancea & Lucian Gaban, 2018. "The Strenght of the Relationship Between Shadow Economy and Corruption: Evidence from a Worldwide Country-Sample," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 1119-1143, August.
    2. Aziz N. Berdiev & James W. Saunoris, 2020. "Cross‐Country Evidence Of Corruption Spillovers To Formal And Informal Entrepreneurship," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 48-66, January.

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