We investigate the relationship between digitalization and the shadow economy in 42 African countries using unbalanced panel data from 2003 to 2016. We begin by drawing on modernization theory to hypothesize that digitalization efforts in African economies represent an augmentation of public service delivery as well as a channel through which the size of the continent's informal economic activity might be reduced. We employ the fixed effects estimation technique as its baseline estimator while correcting for potential endogeneity concerns using an instrumental variable two-stage least squares technique. We show compelling evidence that digitalization is associated with a decrease in the size of the shadow economy in Africa.However, evidence of a larger influence is driven by the availability of telecommunications infrastructure and the expansion of government online services. These findings suggest that policymakers should invest more in digital technology to formalize Africa's hidden economic activity, particularly to fill the post-COVID-19 financing gap.

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Low savings rates in developing countries limit the effectiveness of the local financial sector in providing funding for entrepreneurship development. However, the sheer size and the relative stability of migrants’ remittances to developing countries could be essential in filling this savings gap and fostering formal entrepreneurship development. This paper investigates how local financial sector development serves as a mechanism for positioning a country to take advantage of increasing remittances inflow and channeling them towards formal entrepreneurship development. The paper deviates from the previous studies that assess the combined impact of remittances and financial development on the general economic growth by focusing on formal entrepreneurship development while excluding the informal sector that accounts for large portions of GDP in developing countries. We use a new dataset on new business density in 79 remittance-receiving countries to measure formal entrepreneurship from 2006 to 2020 alongside the panel Feasible Generalized Least Square (FGLS), Driscoll-Kraay standard errors fixed effect and a two-step system GMM techniques for our analysis. Our findings indicate that remittances and financial development are complementary in fostering formal entrepreneurship development in developing countries. Furthermore, we find that remittances positively influence entrepreneurship when domestic credit to the private sector, deposit money bank assets, and liquid liability reach 101.5%, 80%, and 89% of GDP, respectively. The implication is that remittances adequately fill the savings gap in developing countries, allowing local financial institutions to channel credits towards entrepreneurship development.JEL Classification: F24; L26; O16; M13