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Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation

Year 2020, Volume: 28 Issue: 46, 11 - 23, 31.10.2020
https://doi.org/10.17233/sosyoekonomi.2020.04.01

Abstract

An empirical investigation of the 50 US States shows that the relationship between shadow economy and corruption is negative (substitutive) when the shadow economy is relatively small; it is positive (complementary) when the shadow economy is large. According to the robust regression results for 50 American states between 2001 and 2008, the turning point from negative to positive is when the shadow economy of a state is at 7.61 of its GDP. Shadow economy and corruption are first substitutive and then complementary. The lesson to learn is that there is no simple anti-corruption policy rule if one takes into account the varying interaction between corruption and the shadow economy.

References

  • Alt, J.E. & D.D. Lassen (2003), “The political economy of institutions and corruption in American states”, Journal of Theoretical Politics, 15(3), 341-365.
  • Ardizzi, G. & C. Petraglia & M. Piacenza & G. Turati (2014), “Measuring the underground economy with the currency demand approach: A reinterpretation of the methodology, with an application to Italy”, Review of Income and Wealth, 60(4), 747-772.
  • Bardahan, P. (1997), “Corruption and development: A review of issues”, Journal of Economic Literature, 35(3), 1320-1346.
  • Bologna, J. (2017), “Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence From the U.S. States”, Economic Inquiry, 55(1), 137-159.
  • Buehn, A. & F. Schneider (2012), “Shadow economies around the world: Novel insights, accepted knowledge, and new estimates”, International Tax and Public Finance, 19(1), 139-171.
  • Choi, J.P. & M. Thum (2005), “Corruption and the Shadow Economy”, International Economic Review, 46(3), 817-836.
  • Dreher, A. & F. Schneider (2010), “Corruption and the shadow economy: an empirical analysis”, Public Choice, 144(1-2), 215-238.
  • Dreher, A. & C. Kotsogiannis & S. McCorriston (2009), “How do institutions affect corruption and the shadow economy?”, International Tax and Public Finance, 16(6), 773-796.
  • Ekici, T. & M. Besim (2016), “A Measure of the Shadow Economy in a Small Economy: Evidence from Household-Level Expenditure Patterns”, Review of Income and Wealth, 62(1), 145-160.
  • Glaeser, E.L. & R.E. Saks (2006), “Corruption in America”, Journal of Public Economics, 90(6-7), 1053-1072.
  • Goel, R.K. & M.A. Nelson (1998), “Corruption and Government Size: A Disaggregated Analysis”, Public Choice, 97(1), 107-20.
  • Goel, R.K. & M.A. Nelson (2011), “Measures of corruption and determinants of US corruption”, Economics of Governance, 12(2), 155-176.
  • Gokcekus, O. & S. Sonan (2017), “Political contributions and corruption in the United States”, Journal of Economic Policy Reform, 20(4), 360-372.
  • Hibbs Jr., D.A. & V. Piculescu (2005), “Tax Toleration and Tax Evasion: Why Firms Enter the Unofficial Economy”, CEFOS Working Paper 1.
  • Johnson, N.D. & C.L. LaFountain & S. Yamarik (2011), “Corruption is bad for growth (even in the United States)”, Public Choice, 147(3-4), 377-393.
  • Johnson, S. & D. Kaufmann & A. Shleifer (1997), The Unoffficial Economy in Transition (Vol. 2). Brookings Papers on Economic Activity.
  • Lambsdorff, J. (2006), “Causes and Consequences of Corruption: What Do We Know from a Cross-section of Countries?”, in: S. Rose-Ackerman (ed.), International Handbook on the Economics of Corruption, Cheltenham: Edward Elgar, 3-51.
  • Leeson, P.T. & R.S. Sobel (2008), “Weathering Corruption”, The Journal of Law and Economics, 51(4), 667-681. Mauro, P. (1995), “Corruption and growth”, Quarterly Journal of Economics, 110, 681-712.
  • Rose-Ackerman, S. (1998), “Corruption and Development”, in: B. Pleskovic & J.E. Stiglitz (eds.), World Bank Conference on Economic Development 1997, 35-57.
  • Schneider, F. (2017), “Estimating a Shadow Economy: Results, Methods, Problems, and Open Questions”, Open Economics, 2017/1, 1-29.
  • Schneider, F. & D.K. Enste (2000), “Shadow Economies: Size, Causes, and Consequences”, Journal of Economic Literature, 64(March 1994), 1332-1334.
  • Treisman, D. (2000), “The causes of corruption: a cross-national study”, Journal of Public Economics, 76, 399-457.
  • Treisman, D. (2007), “What have we learned about the causes of corruption from ten years of cross-national empirical research?”, Annual Review of Political Science, 10, 211-244.
  • Williams, C.C. & F. Schneider (2016), Measuring the Global Shadow Economy, Cheltenham (UK): Edward Elgar Publishing Company.
  • Wiseman, T. (2013), “US shadow economies: A state-level study”, Constitutional Political Economy, 24(4), 310-335.
  • Zellner, A. (1962), “An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias”, Journal of the American Statistical Association, 57, 348-368.

ABD’de Kayıt Dışı Ekonomi ve Yolsuzluk Birbirinin Yerine Mi Geçer Yoksa Birbirini Mi Tamamlar? Ampirik Bir Çalışma

Year 2020, Volume: 28 Issue: 46, 11 - 23, 31.10.2020
https://doi.org/10.17233/sosyoekonomi.2020.04.01

Abstract

Bu ampirik çalışma ABD’de kayıt dışı ekonominin küçük olduğu eyaletlerde kayıt dışı ekonomi ve yolsuzluk arasında negatif bir ilişkinin olduğunu (birbirinin yerine geçen); kayıt dışı ekonominin büyük olduğu eyaletlerde ise pozitif (birbirini tamamlayan) olduğunu göstermektedir. 2001-2008 yılları arasında, ABD’deki 50 eyalete ait verilere dayalı yapılan regresyon analiz sonuçlarına göre, bu ilişkinin negatiften pozitife geçtiği dönüm noktası, eyaletteki kayıt dışı ekonominin GSYİH’nın %7,61’i kadar olduğu yerdedir: Kayıt dışı ekonomi ve yolsuzluk önce birbirinin yerine geçmekte daha sonra ise birbirlerini tamamlamaktadırlar. Yolsuzluk ve kayıt dışı ekonomi arasındaki ilişkinin değişken olduğunu göz önüne aldığımızda, yolsuzluğa karşı basit bir politika kuralı olamayacağı ortaya çıkmaktadır.

References

  • Alt, J.E. & D.D. Lassen (2003), “The political economy of institutions and corruption in American states”, Journal of Theoretical Politics, 15(3), 341-365.
  • Ardizzi, G. & C. Petraglia & M. Piacenza & G. Turati (2014), “Measuring the underground economy with the currency demand approach: A reinterpretation of the methodology, with an application to Italy”, Review of Income and Wealth, 60(4), 747-772.
  • Bardahan, P. (1997), “Corruption and development: A review of issues”, Journal of Economic Literature, 35(3), 1320-1346.
  • Bologna, J. (2017), “Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence From the U.S. States”, Economic Inquiry, 55(1), 137-159.
  • Buehn, A. & F. Schneider (2012), “Shadow economies around the world: Novel insights, accepted knowledge, and new estimates”, International Tax and Public Finance, 19(1), 139-171.
  • Choi, J.P. & M. Thum (2005), “Corruption and the Shadow Economy”, International Economic Review, 46(3), 817-836.
  • Dreher, A. & F. Schneider (2010), “Corruption and the shadow economy: an empirical analysis”, Public Choice, 144(1-2), 215-238.
  • Dreher, A. & C. Kotsogiannis & S. McCorriston (2009), “How do institutions affect corruption and the shadow economy?”, International Tax and Public Finance, 16(6), 773-796.
  • Ekici, T. & M. Besim (2016), “A Measure of the Shadow Economy in a Small Economy: Evidence from Household-Level Expenditure Patterns”, Review of Income and Wealth, 62(1), 145-160.
  • Glaeser, E.L. & R.E. Saks (2006), “Corruption in America”, Journal of Public Economics, 90(6-7), 1053-1072.
  • Goel, R.K. & M.A. Nelson (1998), “Corruption and Government Size: A Disaggregated Analysis”, Public Choice, 97(1), 107-20.
  • Goel, R.K. & M.A. Nelson (2011), “Measures of corruption and determinants of US corruption”, Economics of Governance, 12(2), 155-176.
  • Gokcekus, O. & S. Sonan (2017), “Political contributions and corruption in the United States”, Journal of Economic Policy Reform, 20(4), 360-372.
  • Hibbs Jr., D.A. & V. Piculescu (2005), “Tax Toleration and Tax Evasion: Why Firms Enter the Unofficial Economy”, CEFOS Working Paper 1.
  • Johnson, N.D. & C.L. LaFountain & S. Yamarik (2011), “Corruption is bad for growth (even in the United States)”, Public Choice, 147(3-4), 377-393.
  • Johnson, S. & D. Kaufmann & A. Shleifer (1997), The Unoffficial Economy in Transition (Vol. 2). Brookings Papers on Economic Activity.
  • Lambsdorff, J. (2006), “Causes and Consequences of Corruption: What Do We Know from a Cross-section of Countries?”, in: S. Rose-Ackerman (ed.), International Handbook on the Economics of Corruption, Cheltenham: Edward Elgar, 3-51.
  • Leeson, P.T. & R.S. Sobel (2008), “Weathering Corruption”, The Journal of Law and Economics, 51(4), 667-681. Mauro, P. (1995), “Corruption and growth”, Quarterly Journal of Economics, 110, 681-712.
  • Rose-Ackerman, S. (1998), “Corruption and Development”, in: B. Pleskovic & J.E. Stiglitz (eds.), World Bank Conference on Economic Development 1997, 35-57.
  • Schneider, F. (2017), “Estimating a Shadow Economy: Results, Methods, Problems, and Open Questions”, Open Economics, 2017/1, 1-29.
  • Schneider, F. & D.K. Enste (2000), “Shadow Economies: Size, Causes, and Consequences”, Journal of Economic Literature, 64(March 1994), 1332-1334.
  • Treisman, D. (2000), “The causes of corruption: a cross-national study”, Journal of Public Economics, 76, 399-457.
  • Treisman, D. (2007), “What have we learned about the causes of corruption from ten years of cross-national empirical research?”, Annual Review of Political Science, 10, 211-244.
  • Williams, C.C. & F. Schneider (2016), Measuring the Global Shadow Economy, Cheltenham (UK): Edward Elgar Publishing Company.
  • Wiseman, T. (2013), “US shadow economies: A state-level study”, Constitutional Political Economy, 24(4), 310-335.
  • Zellner, A. (1962), “An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias”, Journal of the American Statistical Association, 57, 348-368.
There are 26 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Ömer Gökçekus

Friedrich Schneıder This is me 0000-0001-6742-5896

Publication Date October 31, 2020
Submission Date May 8, 2020
Published in Issue Year 2020 Volume: 28 Issue: 46

Cite

APA Gökçekus, Ö., & Schneıder, F. (2020). Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation. Sosyoekonomi, 28(46), 11-23. https://doi.org/10.17233/sosyoekonomi.2020.04.01
AMA Gökçekus Ö, Schneıder F. Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation. Sosyoekonomi. October 2020;28(46):11-23. doi:10.17233/sosyoekonomi.2020.04.01
Chicago Gökçekus, Ömer, and Friedrich Schneıder. “Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation”. Sosyoekonomi 28, no. 46 (October 2020): 11-23. https://doi.org/10.17233/sosyoekonomi.2020.04.01.
EndNote Gökçekus Ö, Schneıder F (October 1, 2020) Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation. Sosyoekonomi 28 46 11–23.
IEEE Ö. Gökçekus and F. Schneıder, “Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation”, Sosyoekonomi, vol. 28, no. 46, pp. 11–23, 2020, doi: 10.17233/sosyoekonomi.2020.04.01.
ISNAD Gökçekus, Ömer - Schneıder, Friedrich. “Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation”. Sosyoekonomi 28/46 (October 2020), 11-23. https://doi.org/10.17233/sosyoekonomi.2020.04.01.
JAMA Gökçekus Ö, Schneıder F. Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation. Sosyoekonomi. 2020;28:11–23.
MLA Gökçekus, Ömer and Friedrich Schneıder. “Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation”. Sosyoekonomi, vol. 28, no. 46, 2020, pp. 11-23, doi:10.17233/sosyoekonomi.2020.04.01.
Vancouver Gökçekus Ö, Schneıder F. Are Shadow Economy and Corruption in US States Substitutive or Complementary? An Empirical Investigation. Sosyoekonomi. 2020;28(46):11-23.