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ABSTRACT
The COVID-19 global pandemic has had a devastating impact on economies and could lead to a surge in shadow or informal economic activity. Perhaps more than ever it is imperative to understand the nature and drivers of shadow economies. The primary focus of this analysis is to reexamine the relationship between corruption and shadow economies by extending previous research to consider a possible moderating effect between economic development and corruption on shadow economies. It is hypothesised that the effect of corruption on the shadow economy will vary with the level of economic development, with corruption having the strongest positive effect in low income countries, but this effect will be mitigated as the level of economic development increases. We find empirical evidence to support this hypothesis using multiple data measures of country corruption and the size of the shadow economy. Policy implications are offered based on the empirical results.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
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20 Ibid., 396.
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30 Ibid.
31 Ibid.
32 Ibid., 218.
33 Ibid.
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81 Ibid.
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85 Medina and Schneider, Shadow economies around the world.
86 Medina and Schneider, ‘Shedding light on the shadow economy’.
87 Dreher and Schneider, (2010), ‘Corruption and the shadow economy’.
88 Ibid.
89 Boehm and Olaya, ‘Corruption in public contracting auctions’; Dreher and Schneider, ‘Corruption and the shadow economy’ (2010); Tanzi, ‘Corruption around the world’.
90 Dreher and Schneider, ‘Corruption and the shadow economy’ (2010).
Additional information
Notes on contributors
Cassandra E. DiRienzo
Cassandra DiRienzo, a professor of economics, writes on issues related to female empowerment, corruption, and the economics of human trafficking. She has recently published in the Journal of Human Trafficking, Environmental Development, and Crime, Law and Social Change.
Jayoti Das
Jayoti Das, a professor of economics, writes on issues related to corruption and economics of tourism. She recently published in Environmental Development and International Criminal Justice Review.