Moderating Effect of Economic Freedom on the Relationship Between Human Capital and Shadow Economy

Abstract

The empirical analysis of the relationship between human capital and shadow economy in the presence of economic freedom is conducted in this paper. Annual panel data are collected in the period 1999-2013 for the sample of 34 countries. The results of linear static and dynamic panel data estimators suggest an impact of economic freedom that is not significant. ARDL framework suggests a significant negative impact of human capital on shadow economy only in the long-run indicating that more educated workforce tends to avoid informal economic activities. Short-run impact is not found to be significant. This result is expected since human capital is considered to be a classic time-variant covariate, i.e. any change requires longer time period. The extended model suggests a significant negative impact of human capital only in the long-run. Economic freedom is not found to be significant in both, short-and the long-run. However, it is important to emphasize that the coefficient with moderator is significant and positive in the short-run indicating that economic freedom supports more educated workforce in their intention to decrease informal economic activity. Hence, as a policy implication there is a necessity to contribute to economic freedom in order to increase the human capital of workforce who will tend to decrease shadow economy.

An empirical assessment of electricity consumption and environmental degradation in the presence of economic complexities

“…Also, β 3 is speculated to be positive referring to electric power consumption to explain the adverse environmental impact. The impact of electricity consumption on ecological footprint is captured by PEC lending credence to (Satrovic 2019b;Murshed 2020;Fahad and (1)…”

Investigate the impact of human capital, economic freedom and governance performance on the economic growth of the BRICS

“…If countries impose economic or political institutions that hinder individual economic choice, we should find lower returns to skill in countries that limit exposure and/or individual responses to disequilibria, which will hurt the economy (King et al, 2012). Economic freedom plays a moderating effect between human capital and the economy based on annual panel data collected in the period 1999-2013 for the sample of 34 developing countries (Satrovic, 2019). To sum up, there is a positive correlation between economic freedom and economic growth.…”

“…, 2012). Economic freedom plays a moderating effect between human capital and the economy based on annual panel data collected in the period 1999–2013 for the sample of 34 developing countries (Satrovic, 2019). To sum up, there is a positive correlation between economic freedom and economic growth.…”

“…Regarding economic freedom, the results of empirical researches on the relationship between human capital and economic growth can be separated into four categories: the first category believes that economic freedom and human capital have a positive impact on economic growth (Kizilkaya et al, 2016). The second category shows that economic freedom has a moderating effect on the relationship between human capital and shadow economy (Crum et al, 2015;Satrovic, 2019). The third category believes that there is no relationship between human capital development and economic freedom and economic growth (Jadoon et al, 2015).…”

The Effects of Human Capital and Globalization on Shadow Economy in Turkey: Fourier-ADL Approach

“…Beşerî sermaye ve kayıt dışı ekonomi ilişkisini ele alan çalışmalar ve elde ettikleri sonuçlar aşağıdaki gibidir: McKeever (2006), Güney Afrika'da 1991 yılında yapılan bir ankete dayandırdığı çalışmasında, beşerî sermayenin işte kalma süresini uzattığı ve kayıt dışı istihdamdan kayıtlı istihdama geçişi sağladığı sonucuna ulaşmıştır. Satrovic (2019Satrovic ( ), 1999Satrovic ( -2013 Gerxhani ve van de Werfhorst (2013), Arnavutluk'un başkenti Tiran'da 2000 yılında yapılan bir ankete dayandırdığı çalışmasında, eğitimin kayıt dışı ekonomiye katılımı azalttığı sonucuna ulaşmıştır. Berrittella (2015), 162 ülkeyi 1999-2007 dönemi için ele alan çalışmasında, kamu eğitim harcamaları ve kayıt dışı ekonomi ilişkisini araştırmıştır.…”