Does globalisation affect the shadow economy?

Research paper by Aziz N. Berdiev, James W. Saunoris

Indexed on: 28 Oct '17Published on: 06 Sep '17Published in: The World Economy


We investigate the impact of globalisation on the shadow economy using panel data for 119 countries. Our evidence suggests that globalisation matters in mitigating shadow development. More specifically, we find that political globalisation reduces the shadow economy, whereas economic and social globalisations have limited statistical support after controlling for important factors that affect the size of the shadow economy. Overall, these results are robust after accounting for an alternative measure of the shadow economy, outliers, endogeneity and alternative model specifications.