International movements of money and men: Impact on informal markets
November 21st 2017
Consiglio Nazionale delle Ricerche
Istituto di Studi sulle Società del Mediterraneo
Sala convegni Polo Umanistico, 6° floor
Via Cardinale Guglielmo Sanfelice 8, Naples
Rajeev K. Goel
Professor of Economics
Illinois State University (USA)
Rajeev K. Goel is Professor of Economics at Illinois State University, USA. He received his PhD from the University of Houston. Dr. Goel’s areas of expertise include economics of corruption and the underground economy, technical change and applied microeconomics. He is a CESifo Research Network Fellow and a Research Fellow at the Kiel Institute for the World Economy, in addition to serving on the editorial boards of various journals. He is the author of two scholarly books and more than 150 scholarly articles.
More information about his research can be found at https://econpapers.repec.org/RAS/pgo308.htm
Using panel data for a large cross-country sample, we consider the roles of three relatively new determinants of the size of the informal economy in a country. The potential determinants are (a) FDI inflows, (b) net inward development aid, and (c) net immigration. Fairly standard control variables are included, and an effort is made to address several methodological considerations. Both FDI and immigration tend to increase the informal sector, although the effects seem small. Aid inflows appear to reduce the informal sector, but the statistical significance of the estimates is low. Among the control variables, government size (consumption) shows the most persistent and significant effect toward increasing the informal economy, while some estimates indicate inflation to lower the informal sector marginally.
As a secondary exercise, we consider the effect of globalization, and note the informality-increasing role of social and overall globalization, and lack of a significant role of economic and political dimensions of globalization. The main contribution of the work perhaps lies in articulating the role of immigration in increasing the informal sector.
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