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Shadow Economy and Poverty: What Causes What?

Thi Hong Hanh Pham ()
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Thi Hong Hanh Pham: University of Nantes, Chemin de la Censive du Tertre

The Journal of Economic Inequality, 2022, vol. 20, issue 4, No 5, 891 pages

Abstract: Abstract Despite a growing number of empirical works on the shadow economy and poverty, the bidirectional causality between these two phenomena has been a relatively neglected area or only treated in a case study of a specific country. So that, the important novelty of this paper is to explore the two-way linkage between poverty and the informal economy by using a panel dataset of around 100 developing countries over the period 1991–2017. Our empirical finding concludes such a complex causality between poverty and informality in the developing world. In addition, this relationship critically depends on a country’s level of economic development. Therefore, the policies, which help developing countries to get out of poverty as well as to regulate the informal activities, should be carefully considered.

Keywords: Poverty; Shadow economy (search for similar items in EconPapers)
JEL-codes: E26 I32 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10888-021-09518-2

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