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Recent studies found that tourism can mitigate the shadow economy, but its effectiveness in a specific country remains uncertain. To fill the research gap, this study investigates the relationship between tourism and the shadow economy in China based on province level data for 2000-2016. The results reveal that the shadow economy will be adversely affected by tourism. Moreover, regional heterogeneity analysis indicates that in central and western regions of China, tourism is more effective in suppressing shadow activities. The findings contribute to a policy reference for mitigating the shadow economy and regulating tourism development.

Is tourism effective in mitigating the shadow economy in developing countries? Evidence from China