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Regulatory discretion and the unofficial economy: A redux

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  • Mazhar, Ummad

Abstract

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.

Suggested Citation

  • Mazhar, Ummad, 2012. "Regulatory discretion and the unofficial economy: A redux," MPRA Paper 39030, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39030
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    References listed on IDEAS

    as
    1. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    2. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    3. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    4. Wilson, Sven E. & Butler, Daniel M., 2007. "A Lot More to Do: The Sensitivity of Time-Series Cross-Section Analyses to Simple Alternative Specifications," Political Analysis, Cambridge University Press, vol. 15(2), pages 101-123, April.
    5. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    6. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    7. 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.
    8. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    More about this item

    Keywords

    Unofficial or Shadow economy; Corruption; Replication; Regulation; Arellano and Bond estimator; Panel Data;
    All these keywords.

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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