Digitalization and informal economy: a global evidence of internet usage

Abstract

This article investigates the links between the technological evolution and the importance of informal economic activities. We examine the influences of internet usage on the shadow economy in a global sample between 2002 and 2015. With this purpose, we mobilize the panel fixed-effects estimate and the panel corrected standard errors estimate (as a robustness check) for the analysis of 114 economies (and three sub-samples including high-income economies (HIEs), upper-middle-income economies (UMEs), and lower-middle-income economies (LMEs)). Our results indicate that the use of the internet generally has a negative impact on the shadow economy. This influence of internet is consistent across all institutional environments. Interestingly, technology is not spread through the shadow economy in the same way everywhere since we observe a U-shaped relationship between internet usage and the shadow economy. Our research shows that technology might also have a negative influence on official activities if its implementation is not combined with an appropriate institutional policy allowing policy-makers to avoid the technology-side effects.