The impact of ICT on shadow economy in West Africa

Abstract

AbstractIn accordance with the 2030 UN Sustainable Development Goal 9, this study probes the impact of information and communication technology (ICT) on shadow economy in West Africa. The study is based on 12 countries in the period of 1996–2017. We augment the least‐squares dummy variables with Driscoll and Kraay's (1998) panel spatial correlation consistent (PSCC‐LSDV) to estimate the model, while the instrumental variables based on fixed effects (IV/FE) estimation technique and the novel method of moments quantile regression (MM‐QR) are used for robustness checks. Dumitrescu and Hurlin's (2012) panel causality test is employed to examine the causal direction. The results show that ICT reduces shadow economy in the West African region. In addition, the results of panel causality show that there is a bidirectional relationship between shadow economy and ICT variables in the West African region. This implies the two variables can be used to predict each other. The study concludes ICT can be used to reduce the level of shadow economy in West African countries and the magnitude impact differs across quantiles.