Premium
Poverty and the shadow economy: The role of governmental institutions
Author(s) -
Berdiev Aziz N.,
Saunoris James W.,
Schneider Friedrich
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12917
Subject(s) - poverty , shadow (psychology) , economics , government (linguistics) , robustness (evolution) , panel data , quality (philosophy) , economy , development economics , economic growth , econometrics , psychology , psychotherapist , linguistics , philosophy , biochemistry , chemistry , epistemology , gene
This paper examines the impact of poverty on the size of the shadow economy using cross‐country panel data for over 100 countries for the period 1991–2015. The results show that poverty has a positive and significant effect on the size of the shadow economy. Furthermore, we argue that the quality and size of governmental institutions matter in moderating the impact of poverty on the shadow economy. Considering the interactions between poverty and government quality and size, we find that poverty has the largest effect on the size of the shadow economy when government quality is the lowest and the size of the government is the largest. These results withstand a battery of robustness checks.