What is it about?
In this paper, we use a novel cross-country dataset to investigate the relationship between the prevalence of the shadow economy and fiscal policy responses to the economic crisis induced by the pandemic.
Photo by Martin Sanchez on Unsplash
Why is it important?
The finding is that countries with a relatively larger shadow economy before the pandemic have adopted a smaller fiscal policy package. The results are robust to different econometric specifications, including an instrumental variable estimation. This reinforces the wider literature that countries (especially those with larger shadow economies) generally follow a procyclical policy as opposed to the optimal and countercyclical one.
Read the Original
This page is a summary of: Fiscal stimulus packages to COVID‐19: The role of informality, Journal of International Development, January 2022, Wiley,
You can read the full text:
The following have contributed to this page