Shadow Economy and Poverty: What Causes What?

Thi Hong Hanh Pham ()
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Thi Hong Hanh Pham: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université

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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.

Date: 2022-02-12
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Published in Journal of Economic Inequality, 2022, 20 (4), pp.861-891. ⟨10.1007/s10888-021-09518-2⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04486050

DOI: 10.1007/s10888-021-09518-2

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