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Asymmetric effects of urbanization on shadow economy both in short-run and long-run:New evidence from dynamic panel threshold model

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  • Pang, Jingru
  • Li, Nan
  • Mu, Hailin
  • Jin, Xin
  • Zhang, Ming

Abstract

Urbanization and shadow economy are both common social problems in developing countries, yet rare studies have explored their potential relationships. Based on the provincial panel data in China, this paper estimates both the short-run and long-run non-linear relationship between urbanization and shadow economy combining with GMM (Generalized method of moments) and threshold analysis specifications, for symmetric analysis and asymmetric analysis, respectively. This paper also estimates if shadow economy is consistent with the EKC (Environment Kuznets Curve) assumption, and including other explanatory variables such as energy consumption, FDI (Foreign Direct Investment), tertiary industry and environmental regulation. Results show that urbanization does have an inversed U-shaped effect on shadow economy, so does economic growth, for both symmetric and asymmetric analyses. Tertiary industry can redouble the scale of shadow economy, which is consistent with all four analysis aspects. Other explanatory variables show slight differences in either symmetric/ asymmetric or short-run/ long-run results.

Suggested Citation

  • Pang, Jingru & Li, Nan & Mu, Hailin & Jin, Xin & Zhang, Ming, 2022. "Asymmetric effects of urbanization on shadow economy both in short-run and long-run:New evidence from dynamic panel threshold model," Technological Forecasting and Social Change, Elsevier, vol. 177(C).
    • Handle: RePEc:eee:tefoso:v:177:y:2022:i:c:s0040162522000464
    DOI: 10.1016/j.techfore.2022.121514
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    2. Wang, Xueyang & Sun, Xiumei & Ahmad, Mahmood & Zhang, Haotian, 2023. "Does low carbon energy transition impede air pollution? Evidence from China's coal-to-gas policy," Resources Policy, Elsevier, vol. 83(C).

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