IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v22y2018i4p1729-1743.html
   My bibliography  Save this article

Corruption and the shadow economy at the regional level

Author

Listed:
  • Robert Gillanders
  • Sinikka Parviainen

Abstract

The links between corruption and the shadow economy have mostly been studied empirically at the country level. This paper contributes to this literature by examining the relationship at the sub‐national level. We also add value to the existing literature in that we employ data capturing the extent to which the shadow economy and corruption are viewed as problems by firms as opposed to the standard measures of corruption and the size of the shadow economy. Using World Bank Enterprise Survey data, we find that sub‐national units in which more firms report that corruption is an obstacle to their operations also tend to have more firms that report that the practices of informal competitors are an obstacle and vice versa. Sub‐Saharan Africa is different in that neither of these findings is evident in that sub‐sample.

Suggested Citation

  • Robert Gillanders & Sinikka Parviainen, 2018. "Corruption and the shadow economy at the regional level," Review of Development Economics, Wiley Blackwell, vol. 22(4), pages 1729-1743, November.
    • Handle: RePEc:bla:rdevec:v:22:y:2018:i:4:p:1729-1743
    DOI: 10.1111/rode.12517
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rode.12517
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rode.12517?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Torgler, Benno & Schneider, Friedrich, 2009. "The impact of tax morale and institutional quality on the shadow economy," Journal of Economic Psychology, Elsevier, vol. 30(2), pages 228-245, April.
    2. Jakob Svensson, 2003. "Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 207-230.
    3. Robert Gillanders, 2014. "Corruption and Infrastructure at the Country and Regional Level," Journal of Development Studies, Taylor & Francis Journals, vol. 50(6), pages 803-819, June.
    4. Razafindrakoto, Mireille & Roubaud, François, 2010. "Are International Databases on Corruption Reliable? A Comparison of Expert Opinion Surveys and Household Surveys in Sub-Saharan Africa," World Development, Elsevier, vol. 38(8), pages 1057-1069, August.
    5. Jay Pil Choi & Marcel Thum, 2005. "Corruption And The Shadow Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 817-836, August.
    6. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.
    7. Knack, Stephen, 2007. "Measuring Corruption: A Critique of Indicators in Eastern Europe and Central Asia," Journal of Public Policy, Cambridge University Press, vol. 27(3), pages 255-291, December.
    8. Johnson, Simon & Kaufmann, Daniel & McMillan, John & Woodruff, Christopher, 2000. "Why do firms hide? Bribes and unofficial activity after communism," Journal of Public Economics, Elsevier, vol. 76(3), pages 495-520, June.
    9. repec:bla:ecopol:v:17:y:2005:i::p:37-75 is not listed on IDEAS
    10. Axel Dreher & Pierre-Guillaume Méon & Friedrich Schneider, 2014. "The devil is in the shadow: Do institutions affect income and productivity or only official income and official productivity?," Post-Print CEB, ULB -- Universite Libre de Bruxelles, vol. 158(1-2), pages 121-141, January.
    11. Gillanders, Robert & Parviainen, Sinikka, 2014. "Experts’ Perceptions versus Firms’ Experiences of Corruption and Foreign Direct Investment," MPRA Paper 58991, University Library of Munich, Germany.
    12. 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.
    13. Andreas Buehn & Friedrich Schneider, 2012. "Corruption and the shadow economy: like oil and vinegar, like water and fire?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 172-194, February.
    14. Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2009. "How do institutions affect corruption and the shadow economy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(6), pages 773-796, December.
    15. Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
    16. Dilyan Donchev & Gergely Ujhelyi, 2014. "What Do Corruption Indices Measure?," Economics and Politics, Wiley Blackwell, vol. 26(2), pages 309-331, July.
    17. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    18. James Alm & Abel Embaye, 2013. "Using Dynamic Panel Methods to Estimate Shadow Economies Around the World, 1984-2006," Working Papers 1303, Tulane University, Department of Economics.
    19. Lassen, David Dreyer, 2007. "Ethnic divisions, trust, and the size of the informal sector," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 423-438, July.
    20. Charles Kenny, 2009. "Measuring Corruption in Infrastructure: Evidence from Transition and Developing Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 45(3), pages 314-332.
    21. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    22. Michael Breen & Robert Gillanders, 2012. "Corruption, institutions and regulation," Economics of Governance, Springer, vol. 13(3), pages 263-285, September.
    23. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17(1), pages 37-75, March.
    24. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
    25. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo.
    26. Egle Tafenau & Helmut Herwartz & Friedrich Schneider, 2010. "Regional Estimates of the Shadow Economy in Europe," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 629-636.
    27. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    28. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    29. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    30. Douglas Hibbs & Violeta Piculescu, 2005. "Institutions, Corruption and Tax Evasion in the Unofficial Economy," Public Economics 0508003, University Library of Munich, Germany.
    31. Rajeev Goel & James Saunoris, 2014. "Global corruption and the shadow economy: spatial aspects," Public Choice, Springer, vol. 161(1), pages 119-139, October.
    32. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    33. Sanjeev Gupta & Hamid Davoodi & Rosa Alonso-Terme, 2002. "Does corruption affect income inequality and poverty?," Economics of Governance, Springer, vol. 3(1), pages 23-45, March.
    34. Benno Torgler & Friedrich Schneider & Christoph Schaltegger, 2010. "Local autonomy, tax morale, and the shadow economy," Public Choice, Springer, vol. 144(1), pages 293-321, July.
    35. 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.
    36. James Alm & Abel Embaye, 2013. "Using Dynamic Panel Methods to Estimate Shadow Economies Around the World, 1984–2006," Public Finance Review, , vol. 41(5), pages 510-543, September.
    37. Reinikka, Ritva & Svensson, Jakob, 2006. "Using Micro-Surveys to Measure and Explain Corruption," World Development, Elsevier, vol. 34(2), pages 359-370, February.
    38. repec:dau:papers:123456789/4352 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Salvatore Capasso & Rajeev K. Goel & James W. Saunoris, 2023. "The nexus between corruption and academic freedom: An international investigation of the underlying linkages," Contemporary Economic Policy, Western Economic Association International, vol. 41(3), pages 513-531, July.
    2. Dagmara Nikulin & Ewa Lechman, 2021. "Shadow Economy in Poland: Results of the Survey," SpringerBriefs in Economics, in: Shadow Economy in Poland, chapter 0, pages 49-65, Springer.
    3. Canh Phuc Nguyen & Binh Quang Nguyen, 2023. "Does the shadow economy matter for tourism consumption? New global evidence," Empirical Economics, Springer, vol. 65(2), pages 729-773, August.
    4. Cummins, Mark & Gillanders, Robert, 2020. "Greasing the Turbines? Corruption and access to electricity in Africa," Energy Policy, Elsevier, vol. 137(C).
    5. Ritwik Banerjee & Amadou Boly & Robert Gillanders, 2022. "Is corruption distasteful or just another cost of doing business?," Public Choice, Springer, vol. 190(1), pages 33-51, January.
    6. Nahid Sultana & Mohammad Mafizur Rahman & Rasheda Khanam, 2022. "Informal Sector Employment and Economic Growth: Evidence from Developing Countries in SDG Perspective," Sustainability, MDPI, vol. 14(19), pages 1-19, September.
    7. Tchablemane YENLIDE & Mawussé Komlagan Nézan OKEY, 2022. "Corruption et accès à l’électricité dans les pays de l’Afrique subsaharienne," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 55, pages 23-37.
    8. Salvatore Capasso & Rajeev K. Goel & James W. Saunoris, 2022. "The Nexus between Corruption and Academic Freedom: An International Examination Using Mediation Analysis," CESifo Working Paper Series 9890, CESifo.
    9. Michael Breen & Robert Gillanders, 2020. "Press Freedom and Corruption Perceptions: Is There a Reputational Premium?," Politics and Governance, Cogitatio Press, vol. 8(2), pages 103-115.
    10. Lv, Zhike, 2020. "Does tourism affect the informal sector?," Annals of Tourism Research, Elsevier, vol. 80(C).
    11. Selçuk Akçay & Emre Karabulutoğlu, 2021. "Do remittances moderate financial development–informality nexus in North Africa?," African Development Review, African Development Bank, vol. 33(1), pages 166-179, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aristidis Bitzenis & Vasileios Vlachos & Friedrich Schneider, 2016. "An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?," Journal of Economic Issues, Taylor & Francis Journals, vol. 50(1), pages 165-196, January.
    2. Aziz N. Berdiev & James W. Saunoris, 2018. "Corruption and Entrepreneurship: Cross‐Country Evidence from Formal and Informal Sectors," Southern Economic Journal, John Wiley & Sons, vol. 84(3), pages 831-848, January.
    3. Cummins, Mark & Gillanders, Robert, 2020. "Greasing the Turbines? Corruption and access to electricity in Africa," Energy Policy, Elsevier, vol. 137(C).
    4. Psychoyios, Dimitrios & Missiou, Olympia & Dergiades, Theologos, 2021. "Energy based estimation of the shadow economy: The role of governance quality," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 797-808.
    5. Andreas Buehn & Friedrich Schneider, 2012. "Corruption and the shadow economy: like oil and vinegar, like water and fire?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 172-194, February.
    6. Aziz N. Berdiev & James W. Saunoris & Friedrich Schneider, 2018. "Give Me Liberty, or I Will Produce Underground: Effects of Economic Freedom on the Shadow Economy," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 537-562, October.
    7. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    8. Nedra Baklouti & Younes Boujelbene, 2020. "A simultaneous equation model of economic growth and shadow economy: Is there a difference between the developed and developing countries?," Economic Change and Restructuring, Springer, vol. 53(1), pages 151-170, February.
    9. Saunoris, James W., 2024. "Individualism, economic freedom, and the development of the shadow economy," Economic Systems, Elsevier, vol. 48(1).
    10. Bologna, Jamie, 2016. "The effect of informal employment and corruption on income levels in Brazil," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 657-695.
    11. Goel, Rajeev K. & Saunoris, James W. & Schneider, Friedrich, 2019. "Drivers of the underground economy for over a century: A long term look for the United States," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 95-106.
    12. Roberto Dell’Anno & Désirée Teobaldelli, 2015. "Keeping both corruption and the shadow economy in check: the role of decentralization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 1-40, February.
    13. Cooray, Arusha & Dzhumashev, Ratbek & Schneider, Friedrich, 2017. "How Does Corruption Affect Public Debt? An Empirical Analysis," World Development, Elsevier, vol. 90(C), pages 115-127.
    14. Rajeev Goel & James Saunoris, 2014. "Global corruption and the shadow economy: spatial aspects," Public Choice, Springer, vol. 161(1), pages 119-139, October.
    15. Joseph Keneck-Massil & Alphonse Noah, 2019. "Shadow economy and educational systems in Africa," Economics Bulletin, AccessEcon, vol. 39(2), pages 1467-1478.
    16. Sahnoun, Marwa & Abdennadher, Chokri, 2019. "The nexus between unemployment rate and shadow economy: A comparative analysis of developed and developing countries using a simultaneous-equation model," Economics Discussion Papers 2019-30, Kiel Institute for the World Economy (IfW Kiel).
    17. Larissa Batrancea & Anca Nichita & Ioan Batrancea & Lucian Gaban, 2018. "The Strenght of the Relationship Between Shadow Economy and Corruption: Evidence from a Worldwide Country-Sample," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 1119-1143, August.
    18. Luc Jacolin & Joseph Keneck Massil & Alphonse Noah, 2021. "Informal sector and mobile financial services in emerging and developing countries: Does financial innovation matter?," The World Economy, Wiley Blackwell, vol. 44(9), pages 2703-2737, September.
    19. Hazans, Mihails, 2011. "What explains prevalence of informal employment in European countries : the role of labor institutions, governance, immigrants, and growth," Policy Research Working Paper Series 5917, The World Bank.
    20. Eugen Dimant & Guglielmo Tosato, 2018. "Causes And Effects Of Corruption: What Has Past Decade'S Empirical Research Taught Us? A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 335-356, April.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:22:y:2018:i:4:p:1729-1743. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.