 Individualism, economic freedom, and the development of the shadow economyJames W. Saunoris Economic Systems, 2024, vol. 48, issue 1 Abstract: To better understand the relationship between formal institutions, culture, and the size of the shadow economy, this paper considers the impact of pro-market institutions and cultures of individualism, and their interplay, on the size of the shadow economy. Using panel data for 64 countries from 1995 to 2017, the results show that economically free countries that value individualism over collectivism are, on average, associated with smaller shadow economies. Furthermore, the findings reveal that individualistic cultures amplify the effect of formal market-supporting institutions in reducing the size of the shadow economy, and vice versa. In terms of policy guidance, the results of this study suggest that policies would benefit from accounting for culture in promoting pro-market institutions to combat the shadow economy or in transitioning shadow participants to the formal sector. Keywords: Shadow economy; Individualism; Economic freedom; Institutions; Culture; Informal institutions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:48:y:2024:i:1:s0939362523001073 DOI: 10.1016/j.ecosys.2023.101168 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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