Journal Article

International movements of money and men: impact on the informal economy

Authors

  • Rajeev Goel
  • Rati Ram
  • Friedrich Schneider
  • Ashley Potempa
Publication Date

Using panel data for a large cross-country sample, we consider the influences of FDI inflows, inward development aid, and immigration on the informal sector. Both FDI and immigration increase the informal sector, with the effect of immigration being relatively more robust. Aid inflows reduce the informal sector, but the statistical significance is low. Among the control variables, government size persistently increases the informal economy, while inflation sometimes lowers the informal sector. As a secondary exercise, we consider the effect of globalization and note the informality increasing role of social and overall globalization, with economic and political globalization being statistically insignificant.

Info

JEL Classification
O17, O19, J46
DOI
10.1007/s12197-019-09480-w

Key Words

  • Development aid
  • foreign direct investment
  • globalization
  • informal economy
  • migration
  • shadow economy

Related Topics