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Internet usage and the shadow economy: Evidence from panel data


  • Elgin, Ceyhun


The enormous spread of the internet in the last 20 years has been having various economic consequences. In this paper I ask whether the spread of the internet aided or abetted the shadow economy. To this end, using a panel data of 152 countries over 9 years from 1999 to 2007, I examine the empirical relationship between the degree of internet usage and the size of the shadow economy. Panel and cross-section estimation results indicate that the association between internet usage and shadow economy size strongly interacts with GDP per-capita. I also suggest and then empirically test an economic mechanism to account for this observation.

Suggested Citation

  • Elgin, Ceyhun, 2013. "Internet usage and the shadow economy: Evidence from panel data," Economic Systems, Elsevier, vol. 37(1), pages 111-121.
  • Handle: RePEc:eee:ecosys:v:37:y:2013:i:1:p:111-121
    DOI: 10.1016/j.ecosys.2012.08.005

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    References listed on IDEAS

    1. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
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    12. Choi, Changkyu, 2010. "The effect of the Internet on service trade," Economics Letters, Elsevier, vol. 109(2), pages 102-104, November.
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    19. Ceyhun Elgin, 2012. "Cyclicality of the Informal Economy," Working Papers 2012/02, Bogazici University, Department of Economics.
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    Cited by:

    1. repec:elg:eechap:17640_12 is not listed on IDEAS
    2. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    3. Rajeev K. Goel & James W. Saunoris, 2017. "Forms of government decentralization and institutional quality: evidence from a large sample of nations," Chapters,in: Central and Local Government Relations in Asia, chapter 12, pages 395-420 Edward Elgar Publishing.
    4. repec:bla:pbudge:v:36:y:2016:i:4:p:68-93 is not listed on IDEAS
    5. Novkovska, Blagica, 2016. "How Strongly The Hidden Economy Of A Small Country Can Be Influenced By Drastic Events: Case Of Macedonia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 187-195.

    More about this item


    Shadow economy; Internet usage; Panel-data;

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General


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