The Shadow Economy and Corruption in ECO Countries

Abstract

This study examines the shadow economy and corruption relationship throughout seven Economic Cooperation Organization (ECO) countries. Utilising shadow economy data provided by Medina and Schneider (2017; 2019) and Transparency International's corruption perception indicator between 2000-2017, regression analysis suggests that there is a statistically significant relationship between corruption and shadow economy, and additionally, that Soviet heritage plays a role in the determination of this relationship. Results show that for post-Soviet ECO nations, the relationship is complimentary, while for ‘Other’ ECO nations, the relationship is substitutive.