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The Strenght of the Relationship Between Shadow Economy and Corruption: Evidence from a Worldwide Country-Sample

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Abstract

Using data from 193 countries and territories, the present study investigates the strength of the relationship between shadow economy and corruption via moderation analysis. The literature reports a rather ambiguous relationship between the two variables. By running four multiple regression models with the bootstrapping technique and judicial independence, reliability of police services, human development and business freedom as moderating variables, we show that shadow economy and corruption are complements. Our study suggests that, when nations have judiciaries free from political influence, enforce law efficiently while protecting social interests, register significant progress in human development (e.g., improved education, proper healthcare and living standards) or efficiently regulate the business environment by minimizing red tape and thus facilitating economic transactions, a small shadow economy is associated with a low corruption level.

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Acknowledgements

This work was supported by a grant of the Babes-Bolyai University through the Grants for Young Researchers Program, Project No. GTC 31780/01.04.2016. We thank two anonymous referees for helpful comments on earlier drafts.

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Authors and Affiliations

  1. Department of Business, Faculty of Business, Babeş-Bolyai University, 7 Horea Street, 400174, Cluj-Napoca, Romania

    Larissa Batrancea & Anca Nichita

  2. Department of Finance, Faculty of Economics and Business Administration, Babeş-Bolyai University, 58-60 Teodor Mihali Street, 400591, Cluj-Napoca, Romania

    Ioan Batrancea

  3. Department of Juridical and Administrative Sciences, Faculty of Law and Social Sciences, “1 Decembrie 1918” University of Alba-Iulia, 15-17 Unirii Street, 510009, Alba-Iulia, Romania

    Lucian Gaban

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  1. Larissa Batrancea
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  2. Anca Nichita
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  3. Ioan Batrancea
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Correspondence to Larissa Batrancea.

Appendix: List of Countries and Territories

Appendix: List of Countries and Territories

The countries and territories included in our analyses were the following:

Afghanistan, Albania, Algeria, Andorra, Angola, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, The Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Burma, Burundi, Cambodia, Cameroon, Canada, Cape Verde, Central African Republic, Chad, Chile, China, Colombia, Comoros, Congo Dem. Rep., Congo Rep., Costa Rica, Côte d’Ivoire, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Fiji, Finland, France, Gabon, The Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong SAR (China), Hungary, Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Kiribati, Korea Dem. Rep., Korea Rep., Kuwait, Kyrgyz Rep., Lao PDR, Latvia, Lebanon, Lesotho, Liberia, Libya, Liechtenstein, Lithuania, Luxemburg, Macao SAR (China), Macedonia FYR, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Micronesia, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Zealand, Nicaragua, Niger, Nigeria, Norway, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russian Federation, Rwanda, Samoa, São Tome and Principe, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, Somalia, South Africa, South Sudan, Spain, Sri Lanka, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Sudan, Suriname, Swaziland, Sweden, Switzerland, Syria, Taiwan (China), Tajikistan, Tanzania, Thailand, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe.

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Batrancea, L., Nichita, A., Batrancea, I. et al. The Strenght of the Relationship Between Shadow Economy and Corruption: Evidence from a Worldwide Country-Sample. Soc Indic Res 138, 1119–1143 (2018). https://doi.org/10.1007/s11205-017-1696-z

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