An Econometric Analysis of the Financial and Economic Determinants of the Shadow Economy

Öz

The shadow economy, which can be defined as unreported and unrecorded economic activities that occur outside of official economic activities, has become a part of the economic activities of both developed and developing countries. The aim of this study is to obtain empirical evidence of the effects of financial development, GDP per capita, and the rule of law on the shadow economy from the perspective of Balkan countries. In the study covering the period 2000-2021, analyses were conducted using the MM-QREG panel quantile regression estimator. According to the results obtained from the study, financial development and the rule of law have a decreasing effect on the shadow economy, whereas GDP per capita has an increasing effect, and these effects are statistically significant at all quantile levels. Key Words: Shadow Economy, Financial Development, Panel Quantile Regression Analysis. JEL Classification: E26, O16, K42

Anahtar Kelimeler

• Informal Economy
• Financial Development
• Panel Quantile Regression Analysis

Proje Numarası

YOKTUR

Kayıt Dışı Ekonominin Finansal ve Ekonomik Belirleyicilerine Yönelik Ekonometrik Bir Analiz

Öz

Resmi olarak yapılan ekonomik faaliyetlerin dışında gerçekleşen, bildirilmeyen ve kaydedilmeyen ekonomik faaliyetler olarak tanımlanabilen kayıt dışı ekonomi hem gelişmiş hem de gelişmekte olan ülkelerin ekonomik faaliyetlerinin bir parçası haline gelmiştir. Bu çalışmanın amacı, Balkan ülkeleri penceresinden finansal gelişmişlik, kişi başına düşen milli gelir ve hukukun üstünlüğünün kayıt dışı ekonomi üzerindeki etkilerine yönelik ampirik kanıtlara ulaşmaktır. 2000-2021 dönemini kapsayan çalışmada, MM-QREG panel kantil regresyon tahmincisi ile analizler yapılmıştır. Çalışmadan elde edilen sonuçlara göre, kayıt dışı ekonomi üzerinde finansal gelişmişlik ve hukukun üstünlüğü azaltıcı yönde, buna karşın kişi başına düşen milli gelir ise artırıcı yönde bir etkiye sahiptir ve bu etkiler tüm kantil seviyelerinde istatistiksel olarak anlamlıdır. Anahtar Kelimeler: Kayıt Dışı Ekonomi, Finansal Gelişmişlik, Panel Kantil Regresyon Analizi JEL Sınıflandırması: E26, O16, K42

Anahtar Kelimeler

• Kayıt Dışı Ekonomi
• Finansal Gelişmişlik
• Panel Kantil Regresyon Analizi

Proje Numarası

YOKTUR

Etik Beyan

Çalışmanın tüm süreçlerinin araştırma ve yayın etiğine uygun olduğunu, etik kurallara ve bilimsel atıf gösterme ilkelerine uyduğumu beyan ederim

Teşekkür

Dergi için emeği geçen tüm çalışma ekibine teşekkür ederim.

Kaynakça

1. Afful, S. L., Bentum-Ennin, I. & Bondzie, E. A. (2025). Financial development and informal economy in Ghana: Exploring the nexus and implications for economic growth and formalization. Development and Sustainability in Economics and Finance, 5, 1-9. https://doi.org/10.1016/j.dsef.2024.100038
2. Agustina, N. (2020). The impact of human capital on shadow economy in Indonesia. Economics and Finance in Indonesia, 66(1), 11-24. https://doi.org/10.47291/efi.v66i1.629.
3. Alfano, M.R., Capasso, S., Ciucci, S. & Spagnolo, N. (2024). The non-linear effect of income on the shadow economy. Socio-Economic Planning Sciences, 95, 102041. https://doi.org/10.1016/j.seps.2024.102041. Alma, Ö. G. (2011). Comparison of robust regression methods in linear regression. International Journal of Contemporary Mathematical Sciences, 6(9). 409-421.
4. Alomari, M., Selmi, R., Mensi, W., Ko, H. U. & Kang, S. H. (2024). Dynamic spillovers in higher moments and jumps across ETFs and economic and financial uncertainty factors in the context of successive shocks. Quarterly Review of Economics and Finance, 93, 210-228. https://doi.org/10.1016/j.qref.2023.12.009
5. Ameer, W., Sohag K., Zhan Q., Shah S.H. & Yongjia, Z. (2025). Do financial development and institutional quality impede or stimulate the shadow economy? A comparative analysis of developed and developing countries. Humanities and Social Sciences Communications, 12(17). https://doi.org/10.1057/s41599-024-04347-w
6. Aransiola, T.J., Justus, M. & Ceccato, V. (2025). Economic growth, income inequality and lethal violence in developed countries. EconomiA, 26(1), 127-146. https://doi.org/10.1108/ECON-10-2023-0163
7. Asllani, A. & Schneider, F. A. (2025). Review of the driving forces of the informal economy and policy measures for mitigation: an analysis of six EU countries. International Tax and Public Finance, 32, 310-344. https://doi.org/10.1007/s10797-024-09842-z
8. Baklouti, N., & Boujelbene, Y. (2019). The economic growth–inflation–shadow economy trilogy: Developed versus developing countries. International Economic Journal, 33(4), 679–695. https://doi.org/10.1080/10168737.2019.1641540

9. Bansah, M. & Mohsin, M. (2024). Tackling the shadow economy through inflation and access to credit. The Journal of International Trade & Economic Development, 33(5), 903–927. https://doi.org/10.1080/09638199.2023.2226239
10. Bayar, Y., Odabas, H., Sasmaz, M. U., & Ozturk, O. F. (2018). Corruption and shadow economy in transition economies of European Union countries: a panel cointegration and causality analysis. EconomicResearch-Ekonomska Istraživanja, 31(1), 1940–1952. https://doi.org/10.1080/1331677X.2018.1498010
11. Bersvendsen, T. & Ditzen, J. (2021). Testing for slope heterogeneity in Stata. The Stata Journal, 21(1), 51-80. https://doi.org/10.1177/1536867X211000004
12. Bethencourt, C. (2022). Crime and social expenditure: A political economic approach. European Journal of Political Economy, 75, 102183. https://doi.org/10.1016/j.ejpoleco.2022.102183
13. Blomquist, J. & Westerlund, J. (2016). Panel bootstrap tests of slope homogeneity. Empirical Economics, 50(4), 1359-1381. https://doi.org/10.1007/s00181-015-0978-z
14. Borlea, S. N., Achim, M. V. & Miron M.G.A. (2017). Corruption, shadow economy and economic growth: An empirical survey across the European Union countries. Studia Universitatis “Vasile Goldis” Arad-Economics Series, 27(2), 19-32. https://doi.org/10.1515/sues-2017-0006
15. Bulut, A (2023). Informal economy and financial development: The role of institutions. Sosyoekonomi, 31(55), 195-209. https://doi.org/10.17233/sosyoekonomi.2023.01.10
16. Canh, N. P. & Thanh, S. D. (2020). Financial development and the shadow economy: A multi-dimensional analysis. Economic Analysis and Policy, 67, 37–54. https://doi.org/10.1016/j.eap.2020.05.002
17. Canh, P.N., Schinckus, C. & Thanh, S. D. (2021). What are the drivers of shadow economy? A further evidence of economic integration and institutional quality. The Journal of International Trade & Economic Development, 30(1), 47-67 https://doi.org/10.1080/09638199.2020.1799428
18. Chandio, A. A., Amin, A., Khan, I., Rehman, A. & Memon, A. (2024). Can digitalization improve agriculture? Exploring the impact of ICT on grain food production in SAARC countries. Information Development, 1-20 https://doi.org/10.1177/02666669231225945
19. Cheng, Y. & Yao, X. (2021). Carbon intensity reduction assessment of renewable energy technology innovation in China: A panel data model with cross-section dependence and slope heterogeneity. Renewable and Sustainable Energy Reviews, 135, 110157. https://doi.org/10.1016/j.rser.2020.110157
20. Cushman, D. O. & Michael, N. (2011). Nonlinear trends in real exchange rates: A panel unit root test approach. Journal of International Money and Finance, 30(8), 1619-1637. https://doi.org/10.1016/j.jimonfin.2011.08.005
21. Dada, J. T., Ajide, F. M., Arnaut, M. & Al-Faryan, M. A. S. (2024). On the contributing factors to shadow economy in Africa: Do natural resources, ethnicity and religious diversity make any difference? Resources Policy, 88, 104478 https://doi.org/10.1016/j.resourpol.2023.104478
22. Doan, N., Nguyen, C.P. & Nguyan, B.Q, (2025) How e-government affects the shadow economy: A further analysis. International Economic Journal, https://doi.org/10.1080/10168737.2025.2456156
23. Fitriyani, N.I., Susanto, H. & Rumna. (2024). The influence of customer reviews and customer ratings on purchasing decisions for beauty products garnier micellar water in Tiktok shop. Jurnal Ilmiah Manajemen Kesatuan, 12(4), 1191-1202. https://doi.org/10.37641/jimkes.v12i4.2611
24. Fotie, A. K. & Mbratana, T. (2024). Informality and development: The nonlinear effect. Economics Letters, 234, 111470. https://doi.org/10.1016/j.econlet.2023.111470.
25. Gengenbach, C., Palm F.C. & Urbain J.P. (2009). Panel unit root tests in the presence of cross sectional dependencies: Comparison and implications for modelling. Econometric Reviews, 29(2), 111-145. https://doi.org/10.1080/07474930903382125
26. Gokmen, S., Dagalp, R. & Kilickaplan, S. (2022). Multicollinearity in measurement error models, Communications in Statistics-Theory and Methods, 51(2), 474-485, https://doi.org/ 10.1080/03610926.2020.1750654 Gujarati, D. (2016). Örneklerle Ekonometri. (Çev: Nasip Bolatoğlu), BB101 Yayınları: Ankara
27. Gunenc, O., Bayman, M. G., Yüksel, E. & Kulhan, N. G. (2024). Hematological factors for predicting methotrexate efficacy in tubal ectopic pregnancy: A retrospective study. Clinical and Experimental Obstetrics and Gynecology, 51(6), 139. https://doi.org/10.31083/j.ceog5106139
28. Gündüz, H. İ. (2017). Testing for slope homogeneity in dynamic panels using the wild bootstrap test. Ekonometri ve İstatistik Dergisi, 26, 53-59. https://dergipark.org.tr/en/pub/iuekois/issue/31079/337065
29. Güvercin, D. (2019). Kişi başı gayri safi yurtiçi hasıla ve suç oranının karbon salınımı üzerine etkisi. Selçuk Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, (Prof. Dr. Fuat Sezgin Özel Sayısı), 25-33. https://dergipark.org.tr/tr/pub/susbed/issue/61824/925028
30. Haruna, E. U. (2023). The multidimensional effect of financial development on the shadow economy in Africa: A dynamic panel analysis approach. International Economics and Economic Policy, 20, 327-365. https://doi.org/10.1007/s10368-023-00561-0
31. Hassan, A. (2024). Mobile Financial services and the shadow economy in Southern African countries: Does regulatory quality matter? International Journal of Financial Studies. 12(4), 115. https://doi.org/10.3390/ijfs12040115
32. Hoinaru, R., Buda, D., Borlea, S.N., Vaidean, V.L. & Achim, M.V. (2020). The impact of corruption and shadow economy on the economic and sustainable development. Do they “sand the wheels” or “grease the wheels”? Sustainability, 12(2), 481, https://doi.org/10.3390/su12020481
33. Işık, C., Bulut, U. Ongan, S., Islam, H. & Irfan, M. (2024). Exploring how economic growth, renewable energy, internet usage, and mineral rents influence CO2 emissions: A panel quantile regression analysis for 27 OECD countries. Resources Policy, 92, 105025 https://doi.org/10.1016/j.resourpol.2024.105025
34. İlarslan, K. & Vurur, N. S. (2024). Kayıt dışı ekonominin belirleyicileri: Türk devletleri teşkilatı ülkeleri üzerine bir inceleme. Türk Dünyası İncelemeleri Dergisi, 24(2), 481-506. https://doi.org/10.32449/egetdid.1522986
35. İlarslan, K. (2024). Non-parametric evidence on the determinants of access to financial services in the countries of the Organization of Turkic States. Eurasian Economic Review, 14,1035-1055. https://doi.org/10.1007/s40822-024-00288-6.
36. İlarslan, K., & Yıldız, M. (2022). Yenilenebilir enerji yatırımlarının finansal belirleyicileri üzerine karşılaştırmalı bir analiz: Asya-Pasifik ve Latin Amerika ülkeleri. Business & Management Studies: An International Journal, 10(4): 1397-1415, https://doi.org/10.15295/bmij.v10i4.
37. Jian, L., Sohail, M.T., Ullah, S. & Majeed, M.T. (2021). Examining the role of non-economic factors in energy consumption and CO2 emissions in China: policy options for the green economy. Environmental Science and Pollution Research, 28, 67667–67676. https://doi.org/10.1007/s11356-021-15359-3
38. Kapicioglu, R. (2022). Kayıtdışı ekonomi ve finansal gelişme arasındaki ilişki: Türkiye örneği. Maliye Çalışmaları Dergisi,68, 67-80. https://doi.org/10.26650/mcd2022-1137137
39. Khan, S., Hamid B. A. & Rehman, M. Z. (2023). Determinants of shadow economy in OIC and non-OIC countries: the role of financial development. International Journal of Emerging Markets, 18(10), 3373-3393. https://doi.org/10.1108/IJOEM-02-2020-0193
40. Koenker, R. & Bassett, G. (1978). Regression quantiles. Econometrica, 46(1), 33- 50. https://doi.org/10.2307/1913643
41. Koenker, R. (2004). Quantile regression for longitudinal data. Journal of Multivariate Analysis, 91(1), 74-89. https://doi.org/10.1016/j.jmva.2004.05.006
42. Konat, G. & Coşkun, М. F. (2022). Testing Unemployment Hysteresis with Multi-Factor Panel Unit Root: Evidence from OECD Countries. Economy of Regions, 18(3), 742–754. https://doi.org/10.17059/ekon.reg.2022-3-9 Korhonen-Kurki, K., D’Amato, D., Belinskij, A., Lazarevic, D., Leskinen, P., Nylen, E-J., Pappila, M., Penttila, O., Pitzen, S.,
43. Pykalainen, N., Turunen, T. & Vikström, S. (2025). Transformative governance: Exploring theory of change and the role of the law. Earth System Governance, 23, 100230. https://doi.org/10.1016/j.esg.2024.100230
44. Luong, T. T. H., Nguyen, T. M. & Nguyen, T. A. N. (2020). Rule of law, economic growth and shadow economy in transition countries. Journal of Asian Finance, Economics and Business, 7(4), 145- 154. https://doi.org/10.13106/jafeb.2020.vol7.no4.145
45. Machado, J. A. & Silva, J. S. (2019). Quantiles via Moments. Journal of Econometrics, 213, 145-173. https://doi.org/10.1016/j.jeconom.2019.04.009
46. Macias, J. B. (2008). Modeling the informal economy in Mexico. A structural equation approach. Munich Personal RePEc Archive. No: 8504. https://mpra.ub.uni-muenchen.de/8504/
47. Mazur, H., Zinevych, O., Guseva, O., Babichev, A. & Valyvsky, S. (2025). The impact of the shadow economy on the stability of the financial system of the state. Salud, Ciencia y Tecnología-Serie de Conferencias, 4, 1423. https://doi.org/10.56294/sctconf20251423
48. Mehmood, S. & Kaewsaeng-on, R. (2024). Quantifying environmental degradation through renewable energy, financial development and economic sustainability: Insights from panel quantile regression analysis. Global Business Review, 1–22. https://doi.org/10.1177/09721509241242530
49. Nwani, C., Bekun, F.V., Agboola, P., Omoke, P. C. & Effiong E. L. (2023). Industrial output, services and carbon emissions: the role of information and communication technologies and economic freedom in Africa. Environment, Development and Sustainability, 25, 3299-3322 https://doi.org/10.1007/s10668-022-02183-z
50. Pal, A., Ali, Z., Khan, S.T., Tiwari, C.K. & Bhat, M.A. (2025). Unveiling the drivers of climate change: the impact of economic indicators, renewable energy consumption and human development through a panel ardl approach. Discover Sustainability, 6, 691 https://doi.org/10.1007/s43621-025-01532-y
51. Pesaran, H. M. & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50–93. https://doi.org/10.1016/j.jeconom.2007.05.010
52. Purwati, A.A., Kurniawan, E., Chandra, T., Deli, M.M., Hamzah, M.L. & Abdullah, S.İ.N.W. (2025). Unlocking consumer behavior: The interplay of marketing mix and hygiene perceptions in Kembar Water’s market success. Journal of Applied Business and Technology, 6(2), 135-145. https://doi.org/10.35145/jabt.v6i2.197
53. Rachmawati, R., Maulana, W. & Efendi, J. (2025). The influence of effectiveness and efficiency on the preparation of digitalization-based financial reports. Wacana Equiliberium: Jurnal Pemikiran & Penelitian Ekonomi, 13(1), 74-86. https://doi.org/10.31102/equilibrium.13.01.74-86
54. Rahman, M. M., Nepal, R. & Alam, K. (2021). Impacts of human capital, exports, economic growth and energy consumption on CO2 emissions of a cross-sectionally dependent panel: Evidence from the newly industrialized countries (NICs). Environmental Science and Policy, 121, 24-36 https://doi.org/10.1016/j.envsci.2021.03.017
55. Remeikiene, R., Gaspareniene, L., Bayar, Y., Ginevicius, R. & Ragaisyte, L. M. (2022). ICT development and shadow economy: Empirical evidence from the EU transition economies. Economic Research-Ekonomska Istraživanja, 35(1), 762-777. https://doi.org/ 10.1080/1331677X.2021.1932545
56. Ridwan, L. I., Ajide, K. B., Cifuentes-Faura, J. & Al-Faryan, M. A. S. (2024). Shadow economy implications of financial development in Africa: Do income groups also matter? Emerging Markets Review, 59, https://doi.org/10.1016/j.ememar.2024.101107
57. Rios-Avila, F. & Maroto, M. L. (2024). Moving beyond linear regression: Implementing and interpreting quantile regression models with fixed effects. Sociological Methods & Research, 53(2), 639-682. https://doi.org/10.1177/00491241211036165
58. Roy, S. K., Dey, S., Das, J., Hossen, B., Das, S., Hasan, Md. M. & Mojumder, P. (2025). Utilising machine learning approaches for enhanced landslide susceptibility mapping in Sikkim, India. Geological Journal, 60, 1150-1169. https://doi.org/10.1002/gj.5198.
59. Salahodjaev, R. (2015). Intelligence and shadow economy: A cross-country empirical assessment. Intelligence, 49, 129-133. https://doi.org/10.1016/j.intell.2015.01.010
60. Satrovic, E. (2019). Moderating effect of economic freedom on the relationship between human capital and shadow economy. Trakya University Journal of Social Science, 21(1), 295-306. https://doi.org/10.26468/trakyasobed.491233
61. Schneider, F. (2004). Shadow economy. In C. K. Rowley & F. Schneider (Eds.). The Encyclopedia of Public Choice Volume I, (pp. 286-296). Springer, Boston, MA. https://doi.org/10.1007/978-0-306-47828-4_24
62. Sulaiman, M. S., Abood, M. M., Sinnakaudan, S. K., Shukor, M. R., You, G. Q., & Chung, X. Z. (2019). Assessing and solving multicollinearity in sediment transport prediction models using principal component analysis. ISH Journal of Hydraulic Engineering, 27(1), 343–353. https://doi.org/10.1080/09715010.2019.1653799
63. Sultana, N., Rahman, M. M., Khanam, R. & Zahidul Islam, K.M. (2021). Review of the informal sector in a developing country: Evidence from monetary and structural equation modelling approach. 1-30. https://ssrn.com/abstract=3933575
64. Suprijono, A., Abbas, E. W., & Riyadi. (2025). Metacognition and cooperative learning based on deliberative democracy moderated by learning style toward critical thinking skill in social studies learning. Cogent Education, 12(1). https://doi.org/10.1080/2331186X.2025.2458915
65. Syed, A. A. (2024). The moderating role of governance, banking regulation, and supervision on shadow economy, financial inclusion, and financial stability nexus: A case of G5 economies. Economic Change and Restructuring, 57(6), 1-31. https://doi.org/10.1007/s10644-024-09754-2
66. Syed, Q. R. & Rahut, D. B. (2024). Aging and carbon emissions in Asian economies: Policy recommendation from panel quantile regression. Geological Journal, 59(2), 538-549. https://doi.org/10.1002/gj.4879
67. Tatoğlu, F. Y. (2018). Panel zaman serileri analizi. Beta Basım Yayım Dağıtım, 2. Baskı: İstanbul.
68. Thanh, B. D., Diep, N. V. & Tram, N. H. M. (2024). Impacts of financial development and green trade on the shadow economy: An insight of eagle countries using Bayesian approaches. PLoS One, 19(5), e0303135. https://doi.org/10.1371/journal.pone.0303135
69. Ur Rahman, S. U., Faisal. F., Ali, A., Sulimany, H. G. H. & Bazhair, A. H. (2023). Do financial technology and financial development lessen shadow economy? Evidence from BRICST economies using heterogenous bootstrap panel causality. Quarterly Review of Economics and Finance, 90, 201–210. https://doi.org/10.1016/j.qref.2023.06.005
70. Wang, G., Feng, L. & Zhao, P. (2024). New approaches for testing slope homogeneity in large panel data models. Communications in Mathematics and Statistics, https://doi.org/10.1007/s40304-023-00371-5
71. Wu, F. D. & Schneider, F. (2019). Nonlinearity between the shadow economy and level of Development. IMF Working Papers, 048, https://doi.org/10.5089/9781484399613.001
72. Yavuz, N. Ç. (2004). Durağanlığın belirlenmesinde KPSS ve ADF testleri: İMKB Ulusal-100 Endeksi ile bir uygulama. İstanbul Üniversitesi İktisat Fakültesi Mecmuası, 54(1), 239-247.