Regulatory discretion and the unofficial economy: A redux
This paper replicates the Johnson et al.’s (1998) empirical analysis of the affects of regulatory discretion on the unofficial economy. The narrow replication uses the data set of the original study which comprises of 49 countries for the year 1997. The wide replication is performed in two ways. Firstly, I investigate the original authors’ results using a larger data set of 162 countries and for a period from 1999 to 2007. Secondly, I use Arellano and Bond estimator to investigate the dynamics and causal effects. In both types of replications the results are similar to those in the original study. However, the estimates using Arellano and Bond estimator exhibit autocorrelation of order greater than 1 in the error term and are unable to pass the overidentifying restrictions test.
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- Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May.
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