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Does regulatory discretion increase the unofficial economy? Evidence from panel data

Author

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  • Ummad Mazhar

    (Beaconhouse National University, Department of Economics, Seeta Majeed School of Liberal Arts and Social Sciences, Lahore, Pakistan)

Abstract

One factor that contributes in the size of the shadow economy is the regulation of business activities. This paper provides empirical analysis of the effects of regulatory discretion on the unofficial economy. It adds to the previous findings by gathering evidence from a large data set of 162 countries for the 1999 to 2007 period. Going beyond simple correlation, it uses the Arellano-Bond estimator to investigate the dynamics and causal effects of regulation on the shadow economy. We find that increase in regulation increases the size of the shadow economy.

Suggested Citation

  • Ummad Mazhar, 2015. "Does regulatory discretion increase the unofficial economy? Evidence from panel data," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 65(1), pages 129-141, March.
    • Handle: RePEc:aka:aoecon:v:65:y:2015:i:1:p:129-141
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    Cited by:

    1. Paraskevi Koufopoulou & Colin C. Williams & Athanassios Vozikis & Kyriakos Souliotis & Antonios Samprakos, 2021. "Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(3-4), pages 23-47, July-Dece.

    More about this item

    Keywords

    unofficial or shadow economy; corruption; replication; regulation; Arellano-Bond estimator; panel data;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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