The relationship between GDP and the size of the informal economy: Empirical evidence for Spain

Pablo Duarte

No 127, Working Papers from University of Leipzig, Faculty of Economics and Management Science

Abstract: The empirical evidence on the linkage of the informal economy and GDP is ambiguous. It depends on the method used to estimate the size of the informal economy. I propose a common factor of four different approximations of the size of the informal economy as an alternative. Using Spain as an example I find that GDP Granger-causes informality, but not the other way around. I also find that positive GDP shocks induce positive and statistically significant responses of the size of the informal economy.

Keywords: informal economy; dynamic factor model (search for similar items in EconPapers)
JEL-codes: C38 O17 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cse, nep-eec and nep-iue
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Journal Article: The relationship between GDP and the size of the informal economy: empirical evidence for Spain (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:leiwps:127

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