The Devil Is in the Shadow. Do Institutions Affect Income and Productivity or Only Official Income and Official Productivity?
Open access
Date
2007-11Type
- Working Paper
ETH Bibliography
yes
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Abstract
This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total ("corrected") factor productivity even becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005503049Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
Aggregate productivity; SCHATTENWIRTSCHAFT; UNDERGROUND ECONOMY; PRODUKTIVITÄT (BETRIEBSWIRTSCHAFT); PRODUCTIVITY (BUSINESS ECONOMICS); INCOME (ECONOMICS); Development accounting; EINKOMMEN (WIRTSCHAFTSWISSENSCHAFTEN); Shadow economy; IncomeOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
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