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.
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Articles in the same Issue
- Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth
- The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore
- Economic Freedom and the Informal Economy
- Sustainability of Current Account Deficits in the OECD Countries: Evidence from Panel Data Estimators
- The Anatomy of Trade Deflection
- An Empirical Analysis of Aggregate Import Demand Function for India
- Russia and the Use of Trade Policy: Concentration with Soviet Successor States
- The Comparative Advantages in the Services Sector of Developing Economies
Articles in the same Issue
- Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth
- The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore
- Economic Freedom and the Informal Economy
- Sustainability of Current Account Deficits in the OECD Countries: Evidence from Panel Data Estimators
- The Anatomy of Trade Deflection
- An Empirical Analysis of Aggregate Import Demand Function for India
- Russia and the Use of Trade Policy: Concentration with Soviet Successor States
- The Comparative Advantages in the Services Sector of Developing Economies