This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption … that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We … also find that stricter regulations increase both corruption and the shadow economy. …

The relationship between corruption and the shadow economy is not clear. Theoretically, they either substitute or … two latent variables - extracts information on various dimensions of corruption and the shadow economy to contribute to … corruption. The results show that the shadow economy influences corruption more than corruption influences the shadow economy. …