The Impact of Banking Development on the Size of the Shadow Economy

Niloy Bose, Salvatore Capasso and Martin Wurm
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Niloy Bose: Department of Economics, University of Wisconsin
Martin Wurm: Department of Economics, University of Wisconsin

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper employs data on 119 countries for the period 1999/2000 to 2004/2005 to examine the impact of banking development on the size of shadow economies. The main results indicate that an improvement in the development of the banking sector is associated with a smaller shadow economy in a wide cross-section of countries. In addition, both depth and efficiency of the banking sector matter equally in reducing the size of a shadow economy. These stylized results are robust under a variety of specifications and controls for simultaneity bias.

Keywords: Shadow Economy; Banking Development. (search for similar items in EconPapers)
JEL-codes: H G (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2008-10-15
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Persistent link: http://EconPapers.repec.org/RePEc:sef:csefwp:207

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