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International movements of money and men: impact on the informal economy

Author

Listed:
  • Rajeev K. Goel

    (Illinois State University
    Kiel Institute for the World Economy)

  • Rati Ram

    (Illinois State University)

  • Friedrich Schneider

    (Johannes Kepler University)

  • Ashley Potempa

    (Illinois State University)

Abstract

Using panel data for a large cross-country sample, we consider the influences of FDI inflows, inward development aid, and immigration on the informal sector. Both FDI and immigration increase the informal sector, with the effect of immigration being relatively more robust. Aid inflows reduce the informal sector, but the statistical significance is low. Among the control variables, government size persistently increases the informal economy, while inflation sometimes lowers the informal sector. As a secondary exercise, we consider the effect of globalization and note the informality-increasing role of social and overall globalization, with economic and political globalization being statistically insignificant.

Suggested Citation

  • Rajeev K. Goel & Rati Ram & Friedrich Schneider & Ashley Potempa, 2020. "International movements of money and men: impact on the informal economy," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(1), pages 179-197, January.
    • Handle: RePEc:spr:jecfin:v:44:y:2020:i:1:d:10.1007_s12197-019-09480-w
    DOI: 10.1007/s12197-019-09480-w
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    Cited by:

    1. Aziz Berdiev & Rajeev K. Goel & James W. Saunoris, 2020. "International Disease Epidemics and the Shadow Economy," CESifo Working Paper Series 8425, CESifo.
    2. Aziz N. Berdiev & Brandon Gomes & James W. Saunoris, 2023. "Revisiting the nexus between globalisation and the shadow economy: Untying the influences of de jure versus de facto globalisation," The World Economy, Wiley Blackwell, vol. 46(1), pages 27-54, January.
    3. Aziz N. Berdiev & Rajeev K. Goel & James W. Saunoris, 2022. "Do disease epidemics force economic activity underground? International evidence," Contemporary Economic Policy, Western Economic Association International, vol. 40(2), pages 263-282, April.
    4. Sai Tang & Zhuolin Wang & Gengqi Yang & Wenwen Tang, 2020. "What Are the Implications of Globalization on Sustainability?—A Comprehensive Study," Sustainability, MDPI, vol. 12(8), pages 1-11, April.
    5. Ting Xu & Zhike Lv, 2023. "The effect of tourism on the shadow economy: The level of economic development is key," Tourism Economics, , vol. 29(8), pages 2129-2142, December.
    6. Nestor SHPAK & Ihor KULYNIAK & Maryana GVOZD & Olga PYROG & Wlodzimierz SROKA, 2021. "Shadow Economy And Its Impact On The Public Administration: Aspects Of Financial And Economic Security Of The Country'S Industry," REVISTA ADMINISTRATIE SI MANAGEMENT PUBLIC, Faculty of Administration and Public Management, Academy of Economic Studies, Bucharest, Romania, vol. 2021(36), pages 81-101, June.

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    More about this item

    Keywords

    Informal economy; Shadow economy; Migration; Foreign direct investment; Development aid; Globalization;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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