Economic complexity and the shadow economy in Africa: An assessment of nonlinearity and asymmetry

James Temitope Dada; Folorunsho M. Ajide; Mosab I. Tabash; Mamdouh Abdulaziz Saleh Al-Faryan

doi:10.18559/ebr.2026.1.2610

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Economic complexity and the shadow economy in Africa: An assessment of nonlinearity and asymmetry

Economics and Business Review

Volume 12 (2026): Issue 1 (April 2026)

By: James Temitope Dada , Folorunsho M. Ajide , Mosab I. Tabash and Mamdouh Abdulaziz Saleh Al-Faryan

Open Access

|Apr 2026

Abstract

Recent literature reveals that economic complexity (EC) has important implications for shadow economy and has generated mixed empirical conclusions. This paper contributes to this debate by investigating the nonlinear and asymmetric effects of EC on shadow economy in 28 Africa countries between 1995 and 2020. Granger and Yoon’s (2002) approach is used to decompose the EC into positive and negative components, while the dynamic panel threshold regression, two-step system generalised method of moments, pooled mean group, augmented mean group, and common correlated mean group are employed as the estimation techniques. The results indicate that positive EC shocks reduce the size of the shadow economy, whereas negative shocks contribute to the growth of informality, thus suggesting the presence of asymmetry. The threshold of economic complexity was found to be 0.41.

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Articles in this issue

DOI: https://doi.org/10.18559/ebr.2026.1.2610 | Journal eISSN: 2450-0097 | Journal ISSN: 2392-1641

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Language: English

Page range: 29 - 54

Submitted on: Sep 29, 2025

Accepted on: Jan 15, 2026

Published on: Apr 10, 2026

Published by: Poznań University of Economics and Business Press

In partnership with: Paradigm Publishing Services

Publication frequency: 4 issues per year

Keywords:

economic complexity,

shadow economy,

Africa,

nonlinearity

Related subjects:

Business and economics,

Political economics,

Political economics, other,

Finance,

Mathematics and statistics for economists,

Econometrics

© 2026 James Temitope Dada, Folorunsho M. Ajide, Mosab I. Tabash, Mamdouh Abdulaziz Saleh Al-Faryan, published by Poznań University of Economics and Business Press
This work is licensed under the Creative Commons Attribution 4.0 License.

Volume 12 (2026): Issue 1 (April 2026)