Economic Complexity and Shadow Economy in Africa

Document Type : Research Paper

Authors

1 Department of Economics, University of Ilorin, Ilorin, Nigeria

2 Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria

10.22059/ier.2024.346815.1007510

Abstract

In line with the nascent literature on economic complexity, this paper answers whether economic complexity impacts the size of the shadow economy in African economies, a region confronted with a large amount of informal economic operations. We apply four classes of mean group estimators (mean group, augmented mean group, common correlated effects mean group, and dynamic common correlated effects mean group) on African panel data of 27 economies from 1995 to 2017. There is no significant evidence to justify that economic complexity affects the size of the shadow economy in the mean group. However, in the group-specific coefficients, the relationship is significantly negative for the Republic of Congo, Ghana, and Uganda, while the opposite result is confirmed for Botswana, Madagascar, and Tunisia. The study concludes that the impact of economic complexity is heterogeneous in the case of African economies. The policy implications of the results are discussed.

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Main Subjects

References

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Iranian Economic Review
Volume 28, Issue 3
September 2024
Pages 788-813

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