| Popis: |
In this paper, we develop a novel and an alternative empirical approach based on the Seo and Shin’s (2016) dynamic FD-GMM panel threshold model to explore whether the impact of the size of the shadow economy on the three key pillars of sustainable development – economic growth, human development, and environmental quality – varies with the level of governance quality. We consider economic, political and institutional dimensions of governance to assess which of them are likely to moderate the shadow economy-sustainable development linkage. Employing panel data for 82 countries over the period 1996–2017, our evidence indicates the presence of a significant threshold, suggesting that the impact of shadow economy on each of the above-mentioned pillars is regime-specific, depending on the countries’ level of governance quality. Moreover, our findings show that the initially detrimental effect of the shadow economy on sustainable development would be attenuated and even turn into a beneficial one if countries reach a certain threshold level of governance quality.This pattern is shown to be robust to various indicators of governance and alternative measures of shadow economy. The findings in this paper therefore suggest that enhancing governance quality can serve as an effective policy tool for abating shadow economy activities and thereby reaping the benefits of economic, social and environmental sustainablility. JEL classification: C33, E26, Q01, O17, O43 |
