The relationship between GDP and the size of the informal economy: Empirical evidence for Spain
AbstractThe empirical evidence on the linkage of the informal economy and GDP is ambiguous. It depends on the method used to estimate the size of the informal economy. I propose a common factor of four different approximations of the size of the informal economy as an alternative. Using Spain as an example I find that GDP Granger-causes informality, but not the other way around. I also find that positive GDP shocks induce positive and statistically significant responses of the size of the informal economy. --
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Bibliographic InfoPaper provided by University of Leipzig, Faculty of Economics and Management Science in its series Working Papers with number 127.
Date of creation: 2014
Date of revision:
informal economy; dynamic factor model;
Find related papers by JEL classification:
- C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-08 (All new papers)
- NEP-CSE-2014-03-08 (Economics of Strategic Management)
- NEP-EEC-2014-03-08 (European Economics)
- NEP-IUE-2014-03-08 (Informal & Underground Economics)
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