The Influence of Economic Freedom on the Shadow Economy in Developed and Developing Countries

Freytag Andreas (), Schneider Friedrich () and Spiegel Sebastian E.
Additional contact information
Freytag Andreas: Department of Economics, Friedrich-Schiller University Jena, Carl-Zeiss-Str. 3, D-07743, Jena, Germany
Schneider Friedrich: Research Institute of Banking and Finance, University of Linz, Altenberger Str. 69, A-4040, Linz, Austria
Spiegel Sebastian E.: Friedrich-Schiller University Jena, Jena, Germany

The Economists' Voice, 2022, vol. 19, issue 2, 183-205

Abstract: We empirically analyze to what extent economic freedom can explain the size and development of the shadow economy in OECD and other European countries. We econometrically examine the relation between a change of the overall index of economic freedom and the change of the shadow economy. We undertake an econometric panel estimation of 141 countries over the period 2000–2007. Our results demonstrate that first, the higher the economic freedom, the lower is the shadow economy. This holds especially for the index-sub-component legal structure and security of property rights. The sub-component freedom to trade internationally provides further support for this relation, limited to cases of positive changes of economic freedom. Second, the effects are asymmetrically, they are stronger when economic freedom increases than in the case of a decrease.

Keywords: shadow economy; economic freedom; economic policy (search for similar items in EconPapers)
JEL-codes: H11 H26 O17 P16 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1515/ev-2022-0008 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:evoice:v:19:y:2022:i:2:p:183-205:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/view/j/ev

DOI: 10.1515/ev-2022-0008

Access Statistics for this article

The Economists' Voice is currently edited by Michael Cragg, Dwight Jaffee and Joseph Stiglitz

More articles in The Economists' Voice from De Gruyter
Bibliographic data for series maintained by Peter Golla ().