IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/23599.html
   My bibliography  Save this paper

Shadow Economy and Poverty

Author

Listed:
  • Nikopour, Hesam
  • Shah Habibullah, Muzafar

Abstract

This study attempts to investigate the relationship between shadow economy and poverty by explaining the mechanism through which shadow economy affects poverty via its impact on government size and economic growth, and using the human poverty index (HPI) for developing and developed countries. In order to achieve this objective, the three-way interaction model is utilized using data of 139 developing and 23 developed countries separately during 1999-2007. For developing countries the dynamic panel system GMM and for developed countries, the fixed and random effects method of estimation is used. The results suggest that increasing the shadow economy leads to increase poverty in developing countries while it decreases poverty in developed countries.

Suggested Citation

  • Nikopour, Hesam & Shah Habibullah, Muzafar, 2010. "Shadow Economy and Poverty," MPRA Paper 23599, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23599
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/23599/1/MPRA_paper_23599.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bahmani-Oskooee, Mohsen, 1999. "Do Federal Budget Deficits Crowd Out or Crowd In Private Investment?," Journal of Policy Modeling, Elsevier, vol. 21(5), pages 633-640, September.
    2. Mr. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 1998/076, International Monetary Fund.
    3. 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.
    4. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
    5. Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2003. "Government expenditures, military spending and economic growth: causality evidence from Egypt, Israel, and Syria," Journal of Policy Modeling, Elsevier, vol. 25(6-7), pages 567-583, September.
    6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    7. Blanca Sanchez‐Robles, 1998. "Infrastructure Investment And Growth: Some Empirical Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 16(1), pages 98-108, January.
    8. repec:bgu:wpaper:163 is not listed on IDEAS
    9. Ravallion, Martin, 2002. "On the urbanization of poverty," Journal of Development Economics, Elsevier, vol. 68(2), pages 435-442, August.
    10. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    11. Dar, Atul A. & AmirKhalkhali, Sal, 2002. "Government size, factor accumulation, and economic growth: evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 679-692, November.
    12. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
    13. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
    14. Fan, Shenggen & Rao, Neetha, 2003. "Public spending in developing countries: trends, determination, and impact," EPTD discussion papers 99, International Food Policy Research Institute (IFPRI).
    15. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," The World Bank Economic Review, World Bank, vol. 11(2), pages 357-382, May.
    16. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    17. Howard White & Edward Anderson, 2001. "Growth versus Distribution: Does the Pattern of Growth Matter?," Development Policy Review, Overseas Development Institute, vol. 19(3), pages 267-289, September.
    18. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    19. Erdal Atukeren, 2005. "Interactions Between Public and Private Investment: Evidence from Developing Countries," Kyklos, Wiley Blackwell, vol. 58(3), pages 307-330, July.
    20. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    21. Ludger Schuknecht & Mr. Vito Tanzi, 1995. "The Growth of Government and the Reform of the State in Industrial Countries," IMF Working Papers 1995/130, International Monetary Fund.
    22. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
    23. J. Barkley Rosser Jr & Marina V. Rosser & Ehsan Ahmed, 2003. "Multiple unofficial economy equilibria and income distribution dynamics in systemic transition," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(3), pages 425-447.
    24. Pak Hung Mo, 2007. "Government Expenditures and Economic Growth: The Supply and Demand Sides," Fiscal Studies, Institute for Fiscal Studies, vol. 28(4), pages 497-522, December.
    25. Quibria, M.G., 2002. "Growth and Poverty: Lessons from the East Asian Miracle Revisited," MPRA Paper 2638, University Library of Munich, Germany.
    26. Dowrick, Steve, 1996. "Estimating the Impact of Government Consumption on Growth: Growth Accounting and Endogenous Growth Models," Empirical Economics, Springer, vol. 21(1), pages 163-186.
    27. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, vol. 70(2), pages 443-477, April.
    28. Alex Cobham (QEH), "undated". "Tax Evasion, Tax Avoidance and Development Finance," QEH Working Papers qehwps129, Queen Elizabeth House, University of Oxford.
    29. International Monetary Fund, 2001. "Transition Economies: How Appropriate is the Size and Scope of Government?," IMF Working Papers 2001/055, International Monetary Fund.
    30. Sanjeev Gupta & Luc Leruth & Luiz de Mello & Shamit Chakravarti, 2003. "Transition Economies: How Appropriate is the Size and Scope of Government?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(4), pages 554-576, December.
    31. Rosser, J. Jr. & Rosser, Marina V. & Ahmed, Ehsan, 2000. "Income Inequality and the Informal Economy in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 156-171, March.
    32. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    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. Aldo Salinas & Cristian Ortiz & Pablo Ponce & Javier Changoluisa, 2023. "Does tourism activity reduce the size of the informal economy? Capturing long-term heterogeneous linkages around the world," Tourism Economics, , vol. 29(2), pages 305-347, March.
    2. Yuriy Timofeyev, 2013. "The Effects of the Informal Sector on Income of the Poor in Russia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 111(3), pages 855-866, May.
    3. Sefa Karagoz, 2020. "The Importance of the Informal Economy for Social Policy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 70(2), pages 479-505, December.
    4. Novkovska, Blagica, 2016. "How Strongly The Hidden Economy Of A Small Country Can Be Influenced By Drastic Events: Case Of Macedonia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 187-195.
    5. Lenka Rihova, 2018. "The Tax Competitiveness of Tourism Enterprises in an International Context," ACTA VSFS, University of Finance and Administration, vol. 12(1), pages 74-95.
    6. Temitope Sade AKINTUNDE & Abiodun Samuel ISAYOMI, 2023. "The Effect Of Informal Economy On Human Capital Development," Business & Management Compass, University of Economics Varna, issue 3, pages 182-195.
    7. Alexis Papathanassis, 2016. "Combating Tourism-related Corruption: Effective Countermeasures Derived from Analysing Tourists’ Perceptions and Experiences," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 248-255, February.

    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. Erdal Atukeren, 2006. "Politico-Economic Determinants of the Crowding-in Effects of Public Investments in Developing Countries," KOF Working papers 06-126, KOF Swiss Economic Institute, ETH Zurich.
    2. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    3. Robert Pater & Tomasz Skica, 2014. "The productivity of public and private sector in Poland," Business and Economic Horizons (BEH), Prague Development Center, vol. 10(2), pages 120-137, July.
    4. Almanzar, Miguel & Torero, Maximo, 2017. "Distributional Effects of Growth and Public Expenditures in Africa: Estimates for Tanzania and Rwanda," World Development, Elsevier, vol. 95(C), pages 177-195.
    5. Selçuk Çağrı ESENER & Evren İPEK, 2018. "The Impacts of Public Expenditure, Government Stability and Corruption on Per Capita Growth: An Empirical Investigation on Developing Countries," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(36).
    6. Calderon, Cesar & Serven, Luis, 2004. "The effects of infrastructure development on growth and income distribution," Policy Research Working Paper Series 3400, The World Bank.
    7. Hüseyin Şen & Ayşe Kaya & Ayşegül Durucan, 2023. "New insights into the growth-maximizing size of government: evidence and implications for Turkey," Economic Change and Restructuring, Springer, vol. 56(4), pages 2243-2296, August.
    8. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    9. repec:cuf:journl:y:2014:v:15:i:2:calderon:serven is not listed on IDEAS
    10. Fiseha Gebregziabher & Miguel Niño-Zarazúa, 2014. "Social Spending and Aggregate Welfare in Developing and Transition Economies," WIDER Working Paper Series wp-2014-082, World Institute for Development Economic Research (UNU-WIDER).
    11. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    12. Gebregziabher, Fiseha & Niño-Zarazúa, Miguel, 2014. "Social spending and aggregate welfare in developing and transition economies," WIDER Working Paper Series 082, World Institute for Development Economic Research (UNU-WIDER).
    13. Dimitrios Paparas & Christian Richter, 2015. "Fiscal policy and economic growth: Empirical evidence from the European Union," Working Papers 2015.06, International Network for Economic Research - INFER.
    14. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.
    15. Hajamini, Mehdi & Falahi, Mohammad Ali, 2018. "Economic growth and government size in developed European countries: A panel threshold approach," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 1-13.
    16. Heinz Handler & Andreas Knabe & Bertrand Koebel & Margit Schratzenstaller-Altzinger & Sven Wehke, 2005. "The Impact of Public Budgets on Overall Productivity Growth," WIFO Working Papers 255, WIFO.
    17. Stephane Straub, 2011. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 683-708.
    18. Negin, Vahideh & Abd Rashid, Zakariah & Nikopour, Hesam, 2010. "The Causal Relationship between Corruption and Poverty: A Panel Data Analysis," MPRA Paper 24871, University Library of Munich, Germany.
    19. Peter Nijkamp & Jacques Poot, Victoria, 2002. "Meta-Analysis of the Impact of Fiscal Policies on Long-Run Growth," Tinbergen Institute Discussion Papers 02-028/3, Tinbergen Institute, revised 23 Apr 2003.
    20. César Calderón & Alberto Chong, 2004. "Volume and Quality of Infrastructure and the Distribution of Income: An Empirical Investigation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 87-106, March.
    21. Giuseppe Di Liddo & Cosimo Magazzino & Francesco Porcelli, 2015. "Decentralization, Growth And Optimal Government Size In The Italian Regional Framework," Working Papers 0115, CREI Università degli Studi Roma Tre, revised 2015.

    More about this item

    Keywords

    Shadow economy; Poverty; Panel data analysis;
    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
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:23599. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.