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The shadow economy Kuznets’s curve panel data analysis

Author

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  • Nikopour, Hesam
  • Shah Habibullah, Muzafar
  • Schneider, Friedrich

Abstract

The review of recent literature shows the relationship between shadow economy and economic growth is ambiguous. This paper attempts to answer whether the relationship between shadow economy and economic growth depends on the level of development or not? In this way, the Shadow Economy Kuznets’s Curve (SEKC) is estimated in two quadratic -Inverted U- and cubic -N shape- functional form by using shadow economies data of 21 selected OECD countries for time period of 1995-2006. The panel data analyses results show that cubic functional form justifies the relationship between shadow economy and economic growth better, this relationship depends on the level of development and the shadow economy has a positive effect on the official economy.

Suggested Citation

  • Nikopour, Hesam & Shah Habibullah, Muzafar & Schneider, Friedrich, 2008. "The shadow economy Kuznets’s curve panel data analysis," MPRA Paper 12956, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12956
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    References listed on IDEAS

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    2. 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.
    3. Torgler, Benno & Schneider, Friedrich, 2007. "Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis," Berkeley Olin Program in Law & Economics, Working Paper Series qt26s710z8, Berkeley Olin Program in Law & Economics.
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    5. Axel Dreher & Friedrich Schneider, 2010. "Corruption and the shadow economy: an empirical analysis," Public Choice, Springer, vol. 144(1), pages 215-238, July.
    6. 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.
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    Cited by:

    1. Nicoletta Batini & Young-Bae Kim & Paul Levine & Emanuela Lotti, 2009. "Informal Labour and Credit Markets: A Survey," School of Economics Discussion Papers 0609, School of Economics, University of Surrey.
    2. Nikopour, Hesam & Shah Habibullah, Muzafar & Schneider, Friedrich & Law, Siong Hook, 2009. "Foreign Direct Investment and Shadow Economy: A Causality Analysis Using Panel Data," MPRA Paper 14485, University Library of Munich, Germany.

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    More about this item

    Keywords

    Shadow economy; economic growth; Kuznets’s curve; panel data analysis; OECD;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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