Shadow Economy in Asian Developing Countries

This paper analyses how some variables, affect the shadow economy, using an Asian developing country data. The literature emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. The limited number of studies uses cross-sectional country data with a relatively few number of observations, and hardly any paper has investigated government effectiveness and provides evidence using within country data. We used 37 countries data that measure these variables behaviour. We find support that its increase bureaucracy quality and government effectiveness leads to a smaller shadow economy in Asian developing countries.