The shadow economy Kuznets’s curve panel data analysis

Nikopour, Hesam and Shah Habibullah, Muzafar and Schneider, Friedrich (2008): The shadow economy Kuznets’s curve panel data analysis.

Abstract

The review of recent literature shows the relationship between shadow economy and economic growth is ambiguous. This paper attempts to answer whether the relationship between shadow economy and economic growth depends on the level of development or not? In this way, the Shadow Economy Kuznets’s Curve (SEKC) is estimated in two quadratic -Inverted U- and cubic -N shape- functional form by using shadow economies data of 21 selected OECD countries for time period of 1995-2006. The panel data analyses results show that cubic functional form justifies the relationship between shadow economy and economic growth better, this relationship depends on the level of development and the shadow economy has a positive effect on the official economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Shadow economy, economic growth, Kuznets’s curve, panel data analysis, OECD
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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