How e-Government Affects the Shadow Economy: A Further Analysis

Abstract

This study re-examines the influence of e-government development on the shadow economy. Empirical analysis is carried out for a sample of 148 countries from 2003 to 2020. First, the negative effects of e-government on the size of the shadow economy as a percentage of GDP are re-affirmed across the globe. Second, telecommunication infrastructure is likely the main factor explaining how e-government affects the shadow economy. Third, the negative effects of e-government are less in countries with high economic uncertainty, large government size, or a greater portion of the services sector, while there is statistically insignificant evidence that e-government might have a greater negative effect in countries with a socialist history, a civil law system, one major religion, or a strong state history. Fourth, panel autoregressive distributed lag estimates show that e-government may increase the shadow economy in the short term, but it reduces the shadow economy significantly in the long term. Fifth, e-government increases the absolute value of the shadow economy. The findings suggest that e-government adoption might provide benefits for both the official and unofficial economies, although the benefits for the official economy outperform those for the unofficial economy, particularly in the long run.