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Informal economy and extractive institutions

Author

Listed:
  • Andrea Fracasso
  • Giuseppe Vittucci Marzetti
  • Diego Coletto

Abstract

The paper aims at assessing the impact of the extractiveness of institutions on the size of the informal economy. After the identification of the variables suitable to proxy the distinct features of institutions, among which their extractiveness, the paper offers a battery of cross-section regressions over two large samples of developed and developing countries. The results suggest that the extractiveness of institutions is a significant determinant of the size of the informal economy and that greater informality is associated with a higher perceived distrust in formal institutions. The results are robust to the inclusion of standard controls, as well as proxies for culture, generalized trust and generalized morality.

Suggested Citation

  • Andrea Fracasso & Giuseppe Vittucci Marzetti & Diego Coletto, 2018. "Informal economy and extractive institutions," Review of Economics and Institutions, Università di Perugia, vol. 9(1).
    • Handle: RePEc:pia:review:v:9:y:2018:i:1:n:2
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    Cited by:

    1. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.
    2. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2023. "An estimation of the informal economy in the agricultural sector in the EU‐15 from 1996 to 2019," Agribusiness, John Wiley & Sons, Ltd., vol. 39(2), pages 406-447, March.

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    More about this item

    Keywords

    Informal economy; Extractive Institutions; Institutional quality;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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