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Shadow Economy and Poverty

Hesam Nikopour () and Muzafar Shah Habibullah

MPRA Paper from University Library of Munich, Germany

Abstract: This study attempts to investigate the relationship between shadow economy and poverty by explaining the mechanism through which shadow economy affects poverty via its impact on government size and economic growth, and using the human poverty index (HPI) for developing and developed countries. In order to achieve this objective, the three-way interaction model is utilized using data of 139 developing and 23 developed countries separately during 1999-2007. For developing countries the dynamic panel system GMM and for developed countries, the fixed and random effects method of estimation is used. The results suggest that increasing the shadow economy leads to increase poverty in developing countries while it decreases poverty in developed countries.

Keywords: Shadow economy; Poverty; Panel data analysis (search for similar items in EconPapers)
JEL-codes: C23 I3 O17 (search for similar items in EconPapers)
Date: 2010-06-05
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-hap
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