Shadow Economy and International Software Piracy

This article uses pooled data over the period 2004--2007 on about 100 nations to examine the impact of the shadow economy on the piracy of computer software. Results support the main hypothesis that a larger shadow economy leads to higher rates of software piracy. This claim is supported by various robustness checks. A 10% increase in the shadow sector increases software piracy about 1.4%. In other findings, greater economic prosperity and greater internet diffusion check piracy, while some legal institutional measures have statistically insignificant effects. Policy implications are discussed