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Shadow Economy And Unemployment Rate In U.S.A. Is There A Structural Relationship? An Empirical Analysis.

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Dell'Anno, Roberto; Solomon, Offiong Helen

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Abstract This paper aims to estimate the size of the U.S. shadow economy (SE) using a Structural Equation Approach and to evaluate if a structural relationship exists between the SE and the unemployment rate (UR) in the United States. The size of the SE is estimated to be decreasing over the last two decades. We corroborate the existence of a structural relationship between the shadow economy and the unemployment rate by using a simple theoretical model. Furthermore, we extend the Okun’s law to estimate the structural relationship between growth rate of official GDP, SE and UR. Our results indicate a significant positive relationship between the SE and the UR.
Document language English
Publication Year 2008
Page/Pages p. 2537-2555
Journal Applied Economics, 40 (2008) 19
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)