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Is there a causal relationship between unemployment and informal economy in Tunisia: evidence from linear and non-linear Granger causality

Author

Listed:
  • Sami Saafi

    (EAS – Faculty of Economic Sciences and Management of Mahdia, University of Monastir)

  • Meriem Haj mohamed

    (EAS, FSEG Mahdia, University of Monastir Tunisia)

  • Abdeljelil Farhat

    (EAS, FSEG Mahdia, University of Monastir Tunisia)

Abstract

This study investigates the dynamic relationship between informal economy and unemployment in Tunisia during the period of 1980–2009. Two different methodologies have been employed to test the Granger non-causality: the linear causality approach of Toda– Yamamoto (1995) and the non-linear causality method of Kyrtsou-Labys (2006). Both tests have yielded a strong evidence for unidirectional causality running from the unemployment to the informal economy. The empirical results show that high levels of unemployment lead to enhanced economic activities in the informal sector. The policy implication is that any measures aiming at a reduction of the informal economy without tackling the principal problem of unemployment would be counterproductive.

Suggested Citation

  • Sami Saafi & Meriem Haj mohamed & Abdeljelil Farhat, 2015. "Is there a causal relationship between unemployment and informal economy in Tunisia: evidence from linear and non-linear Granger causality," Economics Bulletin, AccessEcon, vol. 35(2), pages 1191-1204.
    • Handle: RePEc:ebl:ecbull:eb-14-00291
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    Cited by:

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    2. Sami Saafi & Meriem Bel Haj Mohamed & Abdeljelil Farhat, 2017. "Untangling the causal relationship between tax burden distribution and economic growth in 23 OECD countries: Fresh evidence from linear and non-linear Granger causality," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(2), pages 265-301, December.
    3. Gheorghe H. Popescu & Adriana Ana Maria Davidescu & Catalin Huidumac, 2018. "Researching the Main Causes of the Romanian Shadow Economy at the Micro and Macro Levels: Implications for Sustainable Development," Sustainability, MDPI, vol. 10(10), pages 1-37, September.
    4. Sahnoun, Marwa & Abdennadher, Chokri, 2019. "The nexus between unemployment rate and shadow economy: A comparative analysis of developed and developing countries using a simultaneous-equation model," Economics Discussion Papers 2019-30, Kiel Institute for the World Economy (IfW Kiel).
    5. Sefa Karagoz, 2020. "The Importance of the Informal Economy for Social Policy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 70(2), pages 479-505, December.
    6. Shi Wang & Yizhou Yuan & Hua Wang, 2019. "Corruption, Hidden Economy and Environmental Pollution: A Spatial Econometric Analysis Based on China’s Provincial Panel Data," IJERPH, MDPI, vol. 16(16), pages 1-23, August.

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    More about this item

    Keywords

    Non-linear Granger causality; Unemployment; Informal Economy; Tunisia;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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