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- Publisher
- Springer Journals
- Copyright
- Copyright © 2018 by EEA
- Subject
- Economics; Economics, general; Economic Theory/Quantitative Economics/Mathematical Methods
- ISSN
- 0094-5056
- eISSN
- 1939-4632
- DOI
- 10.1057/s41302-018-0120-y
- Publisher site
- See Article on Publisher Site
Abstract
We empirically investigate the linkages between income inequality and the shadow economy. Employing a panel vector autoregression model, we build impulse response functions to study the time path of income inequality following a shock to the shadow economy, and vice versa. Our results using panel data for 144 countries over the period 1960–2009 reveal a bidirectional positive relationship between the two: specifically, higher income inequality promotes the spread of the shadow economy while the development of the shadow economy contributes to income inequality. Overall, these findings withstand a variety of robustness checks.
Journal
Eastern Economic Journal – Springer Journals
Published: Sep 25, 2018