Public Choice

, Volume 161, Issue 1–2, pp 119–139 | Cite as

Global corruption and the shadow economy: spatial aspects

  • Rajeev K. GoelEmail author
  • James W. Saunoris


Using a large sample of nations, this paper examines the relation between corruption and the shadow economy, focusing especially on geographic spillovers. The results point to complementarity between corruption and the shadow economy. We find evidence of own contagion across nations in both corruption and shadow economy activity, while cross-contagion mostly points to substitution between own shadow economy (corruption) and neighboring corruption (shadow economy). These findings are fairly robust across different estimation techniques and measures of the shadow economy.


Corruption Shadow economy Spatial lag Contagion 

JEL Classification

K49 O17 C21 



We thank Dr. William Shughart, two referees, Michael Brün and Mike Nelson for comments.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsIllinois State UniversityNormalUSA
  2. 2.Department of EconomicsEastern Michigan UniversityYpsilantiUSA

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