Impact Of Shadow Economy Research Articles

Impact of Shadow Economy on Tax Revenue in Sub-Saharan Africa

This study tends to focus on how shadow economy and trade openness influence tax revenue in the Sub-Saharan Africa (SSA). The study used four SSA countries to test this relationship from 1991 to 2017. The study employs pool OLS with robust standard error to address the potential threat of heteroscedasticity. The result from this estimation indicate that shadow economy diminished the amount of tax revenue generated by these countries. Thus, the study recommends that appropriate measures should be put in place to curtail the size of the shadow economy because of its detrimental effects on tax revenue.

Asymmetric Effect of Shadow Economy on Environmental Pollution in Egypt: Evidence from Bootstrap NARDL Technique

This study examines the asymmetric effect of shadow economy (SE) on environmental pollution in Egypt during the 1970 and 2022 period. Using the bootstrap nonlinear autoregressive distributed lag (NARDL) bounds-testing approach, the study presents evidence of nonlinear cointegrating relationship between environmental degradation (carbon emission) and shadow economic activities (alongside globalisation, urbanisation, size of economic activity, industrial growth). In addition, the results demonstrate that the impact of shadow economy on environmental pollution (Env) is nonlinear, with the positive shock in shadow economy promoting environmental degradation and negative shocks promoting environmental quality, both in the short- and long-runs. However, the study discovered that the magnitude of the impact of the SE on Env is larger in the short-run. This is further validated by the dynamic nonlinear ARDL simulations technique which demonstrates that the short-run effect of the SE on Env is large. Additionally, the results suggest that income growth, urbanisation, and industrial growth are important drivers of environmental pollution. Therefore, the study recommends the adoption, and most importantly implementation, of policies and strategies geared towards reducing the shadow economy, and consequently environmental pollution.

ANALYSIS OF TAX POLICY IMPACT ON THE SHADOW ECONOMY OF RUSSIA AND THE USA

The article examines the impact of the shadow sector on the country's economy. It is determined that the generating factors of shadow activity are imperfect tax legislation and established political and economic institutions. The negative impact of shadow economy is expressed in a low quality of economic growth, which causes the need to search for tools to influence shadow activities. The tax policy is examined as one of such tools. Tax policy creates different incentives for economic entities. By so doing, the tax policy should contribute to the accumulation of sufficient funds in the budget, to the growth of business activity in the country. However, for Russia, the relationship between the tax burden and the shadow economy turned out to be insignificant; for the United States, an inverse linear relationship between the indicators was revealed. In consequence of this, it is concluded that only tax measures are insufficient to combat the shadow economy in Russia. Moreover, a general pattern for the two countries was noted, it consists in lowering the tax burden and increasing the shadow activity during periods of economic downturn. The analysis of the tax policies used in the two countries shows that Russia has high taxes and labor contributions compared to the United States. More favorable conditions in Russia compared to the United States in the form of time spent for preparing and paying taxes and the number of tax payments do not affect the reduction of the shadow economy scale. The time required to start a business in Russia exceeds that of the United States. To reduce the scale of shadow activity, it is necessary to revise the mechanism of insurance premiums payment, improve the institutional conditions for business functioning.

The impact of economic shadowing on social development: challenges for macroeconomic stability

Purpose. To develop a model of investigating the link between the level of shadow economy and indicators of social development of the country. Methodology. The study of the relationship between the analyzed indicators was conducted using general and special research methods. The established hypotheses were tested using VAR/VEC modeling. Dickey-Fuller test, the Phillips-Perron test, Joansen test are used in the work. Findings. The paper identifies the risks of the shadow economy for social indicators of macroeconomic stability. Based on the analysis of the countrys social development indicators, indicators were identified that are most sensitive to changes in the level of the shadow economy which are: Gini coefficient, average income ratio of 10% of the richest to 10% of the poorest, average income ratio of 20% of the richest to 20% of the poorest sections of the population, Human Development Index, gross average wage. The EU countries and Ukraine are identified as the statistical base of the study and the assessment period is 20052020. The results of modeling proved the relationship between the level of shadow economy and indicator of social development. Originality. The approach to assessing the relationship between the level of the shadow economy and indicators of social development of the country by considering the indicators that most fully characterize the level of social protection and material well-being of the population has been improved. Practical value. The scientific contribution of the paper is that existing research on the impact of shadow economy on the level of social development of the countries remains fragmented, as well as studies assessing its effect on the macroeconomic stability. The impulse response function constructed by the authors may provide some insight into better understanding of the indicators of social development, the most sensitive to the shadow economy shocks. The results of estimation can be used for practical or scientific purposes.

Impact of shadow economy and corruption on tax efficiency

Shadow economy exists in any economy, having a substantial impact on legal economy. It can be conducted separately, but most often it brings about significant consequences to the economic order. It is, therefore, very important to identify the relationships among factors fostering shadow economy. The universal roots of shadow economy are generally recognised, but there is still a considerable area left to be explored. Even though much attention is paid to taxes as the main cause of shadow economy, few investigations have been dedicated to tax effectiveness in terms of social budget expenditure versus total budget revenue. The aim of the study was to investigate the dependence between social budget spending and shadow economy performance. The MIMIC approach was employed to assess the level of shadow economy in selected OECD countries. Furthermore, the correlation between overall tax burdens and shadow economy was estimated. Moreover, the correlation between social spending and tax burdens was assessed. The correlation value between overall social budget expenditure and shadow economy was calculated to be high, at –0.6682. This means quite a strong negative correlation. The higher level of social spending reduces shadow economy performance. However, the correlation level between overall tax burdens and shadow economy is positive, reaching the level of 0.4458. There is a very strong positive correlation between overall tax burdens and social budget spending, estimated at 0.8984. Based upon the results, it can be concluded that close attention should be paid to tax effectiveness and its relationship with shadow economy performance.

Impact of shadow economy on renewable and nonrenewable energy consumption in Pakistan: evidence from quantile cointegration and causality analysis.

The objective of this study is to identify the impact of the shadow economy on renewable and nonrenewable energy consumption at aggregated and disaggregated levels over the period of 1972Q1-2018Q4 in Pakistan. This study carries nonlinear/asymmetric time series analysis such as quantile unit root test for stationary of data series, newly developed quantile cointegration (Xiao, J. Econom. 150:248-260, 2009) for existence of long-run relationships and novel quantile causality approach (Troster, Econom. Rev. 37, 850-866, 2018) are used to identify direction of causality over the quantiles. The results confirm that quantiles of shadow economy cointegrate with the quantiles of energy consumption at aggregated and disaggregated levels. The results of quantile regression show that a shadow economy has a positive and significant impact on renewable and nonrenewable energy consumption at aggregated and disaggregated levels in all quantiles starting from extreme low quantiles to extreme high quantiles. Furthermore, the results of quantile causality illustrate a unidirectional causality running from underground economy to fluctuations in renewable, nonrenewable, and total energy consumption. More specifically, disaggregated energy consumptions such as oil, gas, nuclear, hydro, and gas are also caused by shadow economy, generally in low and high tails/quantiles.

The impact of shadow economy on environmental degradation: empirical evidence from Pakistan

Pollution and environment degradation have become serious challenges for the entire world, especially for developing countries. Shadow economy is viewed one of the key factors which can significantly affect environmental quality due to its close and direct relationship with environmental degradation. This study contributes by testing whether an enormous informal sector may be accompanied by higher environmental degradation and investigates the relationship between shadow economy and the prominent sources of environmental degradation. While utilizing data from 1966 to 2008 by accounting an ideal region (Pakistan) as highly exposed to environmental risks, we arrive at several important conclusions. Through the lens of ARDL bound testing procedure, we found that there is significant co-integration association between shadow economy and environmental degradation. The same also holds between shadow economy and the prominent sources of $${\text{CO}}_{2}$$ emissions. While controlling for other determinants of pollution, our estimates confirm that shadow economy not only boosts $${\text{CO}}_{2}$$ emissions but also the various sources of environmental degradation are induced through higher informal sector. The estimated results are robust to alternative estimators such as fully modified least squares (FMOLS) and dynamic OLS (DOLS). Consequently, this study put forward policy recommendations aimed at plummeting the size of informal economy through implementing robust regulating policy instruments to minimize the environmental degradation.

ECONOMIC FLUCTUATIONS AND THE SHADOW ECONOMY: A GLOBAL STUDY

The recent economic crisis re-emphasizes the importance of the economic fluctuations. This study investigates the role of shadow economy in combination with economic factors on the economic instability for 133 economies between 1991 and 2015. Using the system-GMM estimations, this paper shows that a larger shadow economy increases the fluctuations of GDP growth rate in relation to the size and the volatility of shadow economy. Notably, the shadow economy presents an inverted-U relationship with economic instability and this relationship is strongest for low- and lower-middle income economies. Our results identify two categories of drivers for economic fluctuations: the stabilizing factors (the labor force and the TFP) and the enhancing factors (capital investment, consumption, government spending, trade, and FDI inflows). Interestingly, exports increase economic fluctuations while imports decrease them. Finally, we discuss the differences in the determinants of economic instability across low, middle and high incomes countries. This study documented that shadow economy influences the economic fluctuations — our results actually confirm our hypothesis and the impact of shadow economy on the effectiveness of macroeconomic policies. The contribution of this paper is to show the extent to which the impact can affect the economic activities and how institutions can smooth this effect.

Assessment of the impact of shadow economy on the amount of tax revenue: A regional perspective

Assessment of the impact of shadow economy on the amount of tax revenue: A regional perspective

The Impact Of Shadow Economy On Non-Oil GDP Growth In Algeria From 1991 To 2017

The Impact Of Shadow Economy On Non-Oil GDP Growth In Algeria From 1991 To 2017

Оценка влияния теневой экономики на величину налоговых доходов бюджета: региональный аспект

Оценка влияния теневой экономики на величину налоговых доходов бюджета: региональный аспект

The impact of shadow economy and/or corruption on private consumption: further evidence from selected Eurozone economies

According to neoclassical perception the growth of private consumption appears to be higher during (or after) fiscal consolidation periods via the fiscal multiplier effect. Therefore, private consumption booms are more likely to be associated with large cuts in deficits by either increasing taxes or by reducing public spending. Simultaneously, only recently shadow economy and corruption have gained scientific attention, and in the studies appear to have mainly negative effects on real economy. This research uses an alternative growth of private consumption approach using dynamic panel data regression analysis of seventeen Eurozone countries over the period 1995–2015. Empirical findings display that corruption and/or shadow economy might be substitutes regarding its effect on individuals’ real consumption growth. Furthermore, consolidation periods experience a marginal lower private growth of consumption, questioning the generality of neoclassical theory implication.

Impact of Shadow Economy on Quality of Life: Indicators and Model Selection

Abstract The purpose of the study was to examine the effect of shadow economy on the level and quality of life. It was supposed that shadow economy effects positively on the level of life (as shadow income increased total revenues). But it can impact negatively on the quality of life. The relationship between growth of life level and quality of life depends from the level of the shadow economy. Some of studies demonstrate the link of shadow economy with the separate quality of life indicators. However, in that cases, the quality of life is the casual variable, witch changes leads to the changes in the latent variable (the shadow economy). Our task is to determine the reverse effect - the shadow economy on the quality of life. At the initial stage of our analysis, the original sample of 150 countries was divided into 5 groups, according to the shadow economy size. Than the average values of each indicator for each cluster was calculated. Next, the determination a regression equation for each cluster and for general sample was done. For this purpose we use averages for each indicator for the period of 1999-2007. As a result of regression analysis, we found that «life expectancy at birth» and «Children in-school rate» are significant for each cluster and for the whole sample. The level of life increases according to the shadow economy's growth. In the same time, life quality indicators which reflects a long and healthy life and access to knowledge - decreases. The regression coefficient increases with the growth of the shadow economy. Our results demonstrate the correctness of the hypothesis about interrelationship between shadow economy and life quality.

The Impact of Shadow Economy On the Stock Market Volatility. A Worldwide Panel Data Analysis

In the present paper an empirical analysis will point out that shadow economy can affect stock prices. The sample covers most industrialized world. Data are taken from Eurostat and (Schneider et al., 2010); (Schneider, 2013). The elaboration of these panel data is made feasible by means of the Eviews software package.