Higher inequality reduces capital accumulation and increases the informal economy, which creates additional employment opportunities for low-skilled and deprived people. Despite this positive feedback, informality raises problems for public finances and biases official statistics, reducing the...

The presence of the shadow economy differs considerably among the countries. Therefore, determination of factors behind the differences in the size of cross-country shadow economy becomes more of an issue for designing and implementing the right policies to combat the shadow economy. This study...