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US shadow economies: a state-level study

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  • Travis Wiseman

Abstract

Recent studies of shadow economies focus primarily on cross-country comparisons. Few have examined regional or state-level variations in underground economic activity. This paper presents estimates of the shadow economy for 50 US states over the period 1997–2008. Results suggest that tax and social welfare burdens, labor market regulations, and intensity of regulation enforcement are important determinants of the underground economy. Among the states, Delaware, on average, maintains the smallest shadow economy at 7.28 % of GDP; Oregon, on average, has the second smallest shadow economy at 7.41 % of GDP; followed by Colorado, averaging 7.52 % of GDP, rounding out the three smallest shadow economies in the US West Virginia and Mississippi, on average, have the largest shadow economies in the US as a percent of GDP (9.32 and 9.54 %, respectively). Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Travis Wiseman, 2013. "US shadow economies: a state-level study," Constitutional Political Economy, Springer, vol. 24(4), pages 310-335, December.
    • Handle: RePEc:kap:copoec:v:24:y:2013:i:4:p:310-335
    DOI: 10.1007/s10602-013-9146-7
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    Cited by:

    1. Alexander Libman & Janis N. Kluge, 2017. "Sticks or Carrots? Comparing Effectiveness of Government Shadow Economy Policies in Russia," Working Papers 364, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. Bologna, Jamie, 2016. "The effect of informal employment and corruption on income levels in Brazil," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 657-695.
    3. 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.
    4. Rajeev K. Goel & James W. Saunoris, 2017. "The nexus of white collar crimes: shadow economy, corruption and uninsured motorists," Applied Economics, Taylor & Francis Journals, vol. 49(31), pages 3032-3044, July.
    5. Travis Wiseman, 2021. "Immigration and Baumolian Entrepreneurship in the United States," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 36(Fall 2021), pages 1-26.
    6. Janis N. Kluge & Alexander Libman, 2018. "Sticks or Carrots? Comparing Effectiveness of Government Informal Economy Policies in Russia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(4), pages 605-637, December.
    7. Buček Jakub, 2017. "Determinants of the Shadow Economy in the Czech Regions: A Region-Level Study," Review of Economic Perspectives, Sciendo, vol. 17(3), pages 315-329, September.
    8. Marshall, Emily C. & Saunoris, James & Solis-Garcia, Mario & Do, Trang, 2023. "Measuring the size and dynamics of U.S. state-level shadow economies using a dynamic general equilibrium model with trends," Journal of Macroeconomics, Elsevier, vol. 75(C).
    9. Brock, Gregory, 2019. "A remote sensing look at the economy of a Russian region (Rostov) adjacent to the Ukrainian crisis," Journal of Policy Modeling, Elsevier, vol. 41(2), pages 416-431.
    10. Rajeev K. Goel & James W. Saunoris, 2019. "Cigarette smuggling: using the shadow economy or creating its own?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 582-593, July.
    11. Wiseman Travis & Walker Paul, 2017. "US Interstate Underground Trade Flow: A Gravity Model Approach," Review of Law & Economics, De Gruyter, vol. 13(2), pages 1-25, July.
    12. Anna Kireenko & Yuriy Ivanov & Ekaterina Nevzorova & Olga Polyakova, 2017. "Shadow Economy in the Regions of the Russian Federation and the Ukraine," Springer Proceedings in Business and Economics, in: David Procházka (ed.), New Trends in Finance and Accounting, chapter 0, pages 301-312, Springer.
    13. Evgeniya Baturina & Alexander Litvinenko, 2018. "Monitoring of Shadow Cash Flows Using Computer Modelling," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 326-338.
    14. Wiseman, Travis, 2016. "U.S. Shadow Economies, Corruption, and Entrepreneurship: State-level Spatial Relations," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    15. Thomas Poufinas & George Galanos & Charalampos Agiropoulos, 2021. "The Impact of Competitiveness on the Shadow Economy," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(1), pages 29-46, February.
    16. Arzhenovskiy, Sergey, 2023. "Estimate of shadow economy dynamics in Russia and regions: The inflationary aspect," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 69, pages 121-140.

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    More about this item

    Keywords

    Shadow economy; MIMIC model; Latent variable; Tax burden; Regulation; US states; D78; H11; H2; K42; O17; O51;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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