Economic complexity and shadow economy: A multi-dimensional analysis

Le Thanh Ha, Hoang Phuong Dung and To Trung Thanh

Economic Analysis and Policy, 2021, vol. 72, issue C, 408-422

Abstract: Our paper is the first attempt to examine the non-linear effects of economic complexity on the shadow economy. By applying diverse econometric techniques to a global sample of 42 low-income & lower-middle-income (LI&LMICs) and 30 upper-middle-income (UMICs) and 38 high-income (HICs) during the 2002–2017 period, our findings confirm the presence of a non-linear association between economic complexity outlook index and the shadow economy while economic complexity index has an increasingly significant and negative influence on shadow economy. Furthermore, a non-linear relationship between economic complexity and the shadow economy more likely exists either in the long run or in the high-income economy. Notably, we find that economic complexity plays a critical role in deteriorating the positive effects of uncertainty on the size of the shadow economy, while institutional quality significantly determines the effect of economic complexity.

Keywords: Economic complexity index; Shadow economy; Non-linear influences; Short-term and long-term effects; Global sample (search for similar items in EconPapers)
JEL-codes: C33 F21 G21 O16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:72:y:2021:i:c:p:408-422

DOI: 10.1016/j.eap.2021.09.011

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