Thesis Public Defense | VNP30 - Trương Trần Minh Thư

Corruption, shadow economy and economic growth: investigating in emerging countries

Student: Trương Trần Minh Thư, VNP-30

Supervisor: Assoc.Prof.Dr. Võ Tất Thắng

Abstract:

The relationship between corruption, the size of the shadow economy, and economic growth is a complex and controversial topic, especially in the context of developing countries that are
characterized by weak institutions and bureaucratic burdens. The study uses panel data of 40 developing countries in the period from 2009 to 2020 to investigate the relationships among corruption, shadow economy and economic growth. The study applies different regression methods, from the basic Pooled OLS regression method to 2SLS and IV-GMM methods incorporating respective instrumental variables and jack-knifed method to address endogeneity. The results reflected a relationship between corruption and the shadow economy as corruption positively affects the expansion of the shadow economy and negatively impact on economic growth. The study also pointed out the impact of the shadow economy on increasing corruption and hindering economic development in developing countries but still should further investigation due to certain limitations. According to the above empirical results, a number of policy proposals were developed to emphasize the importance of governance quality, optimization intermediary channels to narrow the size of underground economic and minimize the negative impacts of corruption on economic development.

Keywords: shadow economy, corruption, economic growth, IV-GMM
JEL classification: C26, D73, O17, O47