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Economic liberalization in Egypt: A way to reduce the shadow economy?

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  • Farzanegan, Mohammad Reza
  • Hassan, Mai
  • Badreldin, Ahmed Mohamed

Abstract

This study examines the relationship between economic liberalization and the size of the shadow economy in Egypt. We use annual data from 1976 to 2013 and show that economic liberalization policies in Egypt have a statistically significant decreasing effect on the size of the shadow economy as a percent of Gross Domestic Product (GDP). This effect is confirmed for both short- and long-term oriented economic liberalization policies. Based on our results, policies which promote trade and economic liberalization can reduce the extension of the shadow economy in Egypt. Therefore, we suggest conditioning international development assistance to Egypt on demonstrable policy actions with respect to economic liberalization.

Suggested Citation

  • Farzanegan, Mohammad Reza & Hassan, Mai & Badreldin, Ahmed Mohamed, 2020. "Economic liberalization in Egypt: A way to reduce the shadow economy?," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 307-327.
    • Handle: RePEc:eee:jpolmo:v:42:y:2020:i:2:p:307-327
    DOI: 10.1016/j.jpolmod.2019.09.008
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    More about this item

    Keywords

    Shadow economy; Economic liberalization; Time-series analysis; Arab Spring; Egypt;
    All these keywords.

    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

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