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Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis

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This article aims to estimate the size of the US 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 SE and the UR 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 Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600970195

Affiliations: 1: Department of Economics and Statistics, University of Salerno, Fisciano (SA) 84084, Italy 2: Department of Economics, University of Essex, Colchester CO4 3SQ, UK

Publication date: October 1, 2008

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