Energy based estimation of the shadow economy: The role of governance quality

Dimitrios Psychoyios, Olympia Missiou and Theologos Dergiades

The Quarterly Review of Economics and Finance, 2021, vol. 80, issue C, 797-808

Abstract: The shadow economy (SE) is a pathological normalcy, not only in developing countries but also in developed ones, causing disagreeable distortions in the real economy. In this paper, we estimate the size of the informal sector in nineteen countries of the European Union (EU) by implementing three variations of the physical input approach (we use electricity consumption as input). All estimates show that EU countries experience high shadow economy levels with a decreasing trend. Moreover, we assess the explanatory power of three governance quality indicators of the informal sector using a set of panel regression specifications as well as a set of quantile regression specifications. Both approaches show that overall governance quality is the most prominent factor in determining the SE levels. Given the inherent advantage of quantile regression to identify impact differentiations across the conditional distribution of the dependent variable a significant policy action is revealed. In particular, countries with high shadow economy levels can reduce their informal sector, at an increasing rate, by improving governance quality.

Keywords: Shadow economy; Energy; Panel and quantile regression; Governance quality (search for similar items in EconPapers)
JEL-codes: E26 G15 O17 O52 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976919301425
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Energy based estimation of the Shadow Economy: The role of Governance Quality (2019)
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:eee:quaeco:v:80:y:2021:i:c:p:797-808

DOI: 10.1016/j.qref.2019.07.001

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().