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Corruption and the shadow economy: an empirical analysis

This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a crosssection of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.

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File URL: http://hdl.handle.net/10.1007/s11127-009-9513-0
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Article provided by Springer in its journal Public Choice.

Volume (Year): 144 (2010)
Issue (Month): 1 (July)
Pages: 215-238

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Handle: RePEc:kap:pubcho:v:144:y:2010:i:1:p:215-238
DOI: 10.1007/s11127-009-9513-0
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/public+finance/journal/11127/PS2

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  1. Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2004. "Corruption Around The World: Evidence From A Structural Model," Public Economics 0406004, EconWPA.
  2. Alesina, Alberto & Devleeschauwer, Arnaud & Wacziarg, Romain & Kurlat, Sergio & Easterly, William, 2003. "Fractionalization," Scholarly Articles 4553003, Harvard University Department of Economics.
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  7. Loayza, Norman A., 1997. "The economics of the informal sector : a simple model and some empirical evidence from Latin America," Policy Research Working Paper Series 1727, The World Bank.
  8. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
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  11. Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2009. "How do institutions affect corruption and the shadow economy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(6), pages 773-796, December.
  12. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
  13. Jay Pil Choi & Marcel Thum, 2002. "Corruption and the Shadow Economy," CESifo Working Paper Series 633, CESifo Group Munich.
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  19. repec:zbw:rwidps:0035 is not listed on IDEAS
  20. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
  21. Hans Pitlik & Björn Frank & Mathias Firchow, 2010. "The demand for transparency: An empirical note," The Review of International Organizations, Springer, vol. 5(2), pages 177-195, June.
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  24. Toke S. Aidt & Martin Gassebner, 2010. "Do Autocratic States Trade Less?," World Bank Economic Review, World Bank Group, vol. 24(1), pages 38-76, January.
  25. Dreher, Axel & Siemers, Lars-H. R., 2005. "The Intriguing Nexus between Corruption and Capital Account Restrictions," RWI Discussion Papers 35, RWI - Leibniz-Institut für Wirtschaftsforschung.
  26. Pierre-Guillaume Méon & Khalid Sekkat, 2004. "Does the quality of institutions limit MENA integration in the world economy?," ULB Institutional Repository 2013/7360, ULB -- Universite Libre de Bruxelles.
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