The Effect of Public Education Expenditure on Shadow Economy: A Cross-Country Analysis

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Abstract

This paper empirically examines whether devoting more resources to education can reduce the size of the shadow economy on a cross-section of countries. The findings show a negative relationship between public education expenditure and the size of the shadow economy, which is robust to the inclusion of different proxies for the control variables, a large set of policy variables, regional differences and endogeneity. The findings also emphasize the role of education, suggesting that public policies devoted to higher education level imply a decreasing effect on the shadow economy.
Original languageEnglish
Pages (from-to)527-546
Number of pages20
JournalInternational Economic Journal
Volume29
Publication statusPublished - 2015

All Science Journal Classification (ASJC) codes

  • General Economics,Econometrics and Finance

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