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Is the shadow economy a bane or boon for economic growth?
Author(s) -
Saunoris James W.
Publication year - 2018
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12332
Subject(s) - externality , economics , shadow (psychology) , productivity , economy , economic sector , shadow price , macroeconomics , microeconomics , psychology , mathematical optimization , mathematics , psychotherapist
This paper uses the theoretical framework developed by Feder (1983) and Ram (1986) to examine interactions (i.e. externalities and intersectoral factor productivity differentials) between the official and unofficial sectors of the economy. Results from the empirical analysis, using data on over 100 countries from 1970 to 2008, suggest that the marginal externality effect of growth in the unofficial sector on the official sector is positive. Further, input productivities are higher in the unofficial sector relative to the official sector. These results are robust using alternate measures of the (unobserved) unofficial economy and across level of development.