The Shadow Economy Determinants - The Case of Portugal

Maria Teresa Medeiros Garcia, Diogo Miguel Assunção de Freitas Sanches


Despite the existence of many studies regarding the meaning and measurement of the shadow economy, literature dedicated to the study of its determinants is almost inexistent. Thus, this study intends to explore the impact of several variables on the shadow economy in Portugal, using data from 1983 to 2015. The findings suggest that social security expenditure and the real Gross Domestic Product (GDP) growth rate exerted negative impacts on the size of the shadow economy.

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