Economic freedom and the informal economy

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    5 Citations (Scopus)

    Abstract

    This paper empirically investigates the effect of economic freedom on the informal economies in a sample of 112 countries over the period 2000-2007. We employ two methodologies: fixed effect and the GMM models. We find a statistically significant negative relationship between economic freedom and the informal economy. This conclusion indicates that the nature of the economic system plays an important role in seizing the informal economy. Further, our results demonstrate that the formal and informal economies are substitutes. The policy implication is that economies with high share of informal economy should work with fewer economic restrictions.

    Original languageEnglish
    Article number20170002
    JournalGlobal Economy Journal
    Volume17
    Issue number4
    DOIs
    Publication statusPublished - Dec 20 2017

    Keywords

    • Economic freedom
    • Fixed effect model
    • Gmm model
    • Informal economy
    • Panel analysis

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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