The impact of the informal economy on R&D, wage inequality and economic growth

Oscar Afonso and Rui Sarabanda

Applied Economics Letters, 2017, vol. 24, issue 1, 39-44

Abstract: We extend the existing research and development (R&D) growth literature by focusing on the short–medium–long run effects of the informal sector on R&D intensity, wage inequality and economic growth, and by considering 18 OECD countries between 1990 and 2008. We show that: the steady state is unique and stable; the share of informal economy (IE) in production affects negatively R&D intensity and wage equality; Nordic countries have the lowest share of IE in production, while Mediterranean countries have the highest share of IE, wage inequality and R&D intensity but R&D spillovers are lower.

Date: 2017
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DOI: 10.1080/13504851.2016.1158913

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