{"title":"Individualism, economic freedom, and the development of the shadow economy","authors":"James W. Saunoris","doi":"10.1016/j.ecosys.2023.101168","DOIUrl":null,"url":null,"abstract":"<div><p>To better understand the relationship between formal institutions, culture, and the size of the shadow economy, this paper considers the impact of pro-market institutions and cultures of individualism, and their interplay, on the size of the shadow economy. Using panel data for 64 countries from 1995 to 2017, the results show that economically free countries that value individualism over collectivism are, on average, associated with smaller shadow economies. Furthermore, the findings reveal that individualistic cultures amplify the effect of formal market-supporting institutions in reducing the size of the shadow economy, and vice versa. In terms of policy guidance, the results of this study suggest that policies would benefit from accounting for culture in promoting pro-market institutions to combat the shadow economy or in transitioning shadow participants to the formal sector.</p></div>","PeriodicalId":51505,"journal":{"name":"Economic Systems","volume":"48 1","pages":"Article 101168"},"PeriodicalIF":2.8000,"publicationDate":"2024-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Systems","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0939362523001073","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
To better understand the relationship between formal institutions, culture, and the size of the shadow economy, this paper considers the impact of pro-market institutions and cultures of individualism, and their interplay, on the size of the shadow economy. Using panel data for 64 countries from 1995 to 2017, the results show that economically free countries that value individualism over collectivism are, on average, associated with smaller shadow economies. Furthermore, the findings reveal that individualistic cultures amplify the effect of formal market-supporting institutions in reducing the size of the shadow economy, and vice versa. In terms of policy guidance, the results of this study suggest that policies would benefit from accounting for culture in promoting pro-market institutions to combat the shadow economy or in transitioning shadow participants to the formal sector.
期刊介绍：
Economic Systems is a refereed journal for the analysis of causes and consequences of the significant institutional variety prevailing among developed, developing, and emerging economies, as well as attempts at and proposals for their reform. The journal is open to micro and macro contributions, theoretical as well as empirical, the latter to analyze related topics against the background of country or region-specific experiences. In this respect, Economic Systems retains its long standing interest in the emerging economies of Central and Eastern Europe and other former transition economies, but also encourages contributions that cover any part of the world, including Asia, Latin America, the Middle East, or Africa.
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