Figure 1
Figure 2
Figure A1
Tests for threshold effects
| Test for single threshold | |
|---|---|
| F1 | 22.97*** |
| p-value | 0.0067 |
| (10%, 5%, 1% critical value) | (13.0142; 14.8043; 19.9052) |
| Test for two thresholds | |
| F2 | 9.58 |
| p-value | 0.1600 |
| (10%, 5%, 1% critical value) | (10.8853; 14.6780; 20.4151) |
| Test for triple thresholds | |
| F3 | 9.45 |
| p-value | 0.2000 |
| (10%, 5%, 1% critical value) | (12.9204; 16.9980; 27.0286) |
Matrix of correlation
| Variable | und_econ | refpop | tax | ln(GDPc) | u | inst_qual | gov | open | im_pop |
|---|---|---|---|---|---|---|---|---|---|
| und_econ | 1 | ||||||||
| refpop | −0.391 | 1 | |||||||
| tax | −0.013 | 0.231 | 1 | ||||||
| ln(GDPc) | −0.799 | 0.449 | 0.299 | 1 | |||||
| u | 0.325 | −0.293 | −0.288 | −0.411 | 1 | ||||
| inst_qual | −0.782 | 0.494 | 0.305 | 0.865 | −0.453 | 1 | |||
| gov | 0.143 | −0.051 | 0.700 | −0.016 | −0.025 | 0.029 | 1 | ||
| open | −0.102 | 0.159 | 0.270 | 0.212 | −0.256 | 0.188 | 0.200 | 1 | |
| im_pop | −0.198 | 0.234 | 0.344 | 0.404 | −0.290 | 0.338 | 0.173 | 0.543 | 1 |
Results of single threshold models
| Dependent variable: underground economy (und_econ) | |||||||
|---|---|---|---|---|---|---|---|
| Models | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| Estimated threshold | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 |
| Lower | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 | 0.00572 |
| Upper | 0.00589 | 0.00589 | 0.00589 | 0.00589 | 0.00589 | 0.00589 | 0.00589 |
| refpop – first regime coefficient (α11) | 226.3*** (51.11) | 345.9*** (86.92) | 285.2*** (48.28) | 224.8*** (57.01) | 326.8*** (66.39) | 239.5*** (55.23) | 239.3*** (57.52) |
| refpop – second regime coefficient (α12) | −0.978*** (0.266) | −0. 951*** (0.331) | −0. 622*** (0.219) | −0.792*** (0.267) | −0.946*** (0.243) | −0.974*** (0.235) | −0.826*** (0.288) |
| Control variables | |||||||
| constant | 40.44*** (3.896) | 6.654*** (1.709) | 8.196*** (1.513) | 40.83*** (3.621) | 11.11*** (1.429) | 25.38*** (6.497) | 27.21*** (6.176) |
| tax | −0.011 (0.008) | −0.064** (0.027) | −0.026** (0.011) | −0.059* (0.031) | |||
| ln(GDPc) | −3.292*** (0.382) | −3.299*** (0.391) | −1.561*** (0.699) | −1.751*** (0.663) | |||
| u | −0.058*** (0.013) | −0.091*** (0.023) | −0.037** (0.014) | −0.065** (0.026) | |||
| inst_qual | −2.225** (0.939) | −0.291 (0.718) | −0.866 (0.822) | −0.369 (0.663) | |||
| gov | 0.015 (0.011) | 0.038* (0.021) | 0.004 (0.011) | 0.027 (0.021) | |||
| Open | −0.021*** (0.005) | −0.022*** (0.004) | −0.014** (0.005) | −0.011** (0.004) | |||
| im_pop | −0.352*** (0.131) | −0.489*** (0.141) | −0.368** (0.143) | −0.364** (0.143) | |||
| lag(und_econ) | 0.663*** (0.027) | 0.753*** (0.061) | 0.708*** (0.049) | 0.656*** (0.027) | 0. 641*** (0.038) | 0. 651*** (0.029) | 0.659*** (0.028) |
| Wald χ2 | 3,399.1 Pr.=0.000 | 1,565.5 Pr.=0.000 | 1,062.8 Pr.=0.000 | 7,305.4 Pr.=0.000 | 2,287.3 Pr.=0.000 | 5,389.2 Pr.=0.000 | 8,689.12 Pr.=0.000 |
| Number of observations | 532 | 532 | 532 | 532 | 532 | 532 | 532 |
| Number of groups | 28 | 28 | 28 | 28 | 28 | 28 | 28 |
Description of variables and their expected signs
| Variables | Explanation | µm | Source | Expected sign |
|---|---|---|---|---|
| Underground economy (und_econ) – dependent variable | Level of underground economy as percentage of GDP. | % | Schneider (2016), Medina and Schneider (2018). | |
| Share of refugee population (refpop) – interest variable | Refugee population as percentage of population in destination country. | % | World Bank (2022a). | ± |
| Controls: | ||||
| Tax burden (tax) | Tax revenues as percentage of GDP. | % | World Bank (2022a). | + |
| GDPc | GDPc (constant 2015 US$). | US$ | World Bank (2022a). | − |
| Unemployment (u) | Total of unemployed persons as percentage of total labor force. | % | World Bank (2022a). | + |
| Institutional quality (inst_qual) | Captured as Rule of Law indicator, with range goes from −2.5 (weak) to 2.5 (strong) governance performance. | Index | World Bank (2022b). | − |
| Size of government (gov) | Volume of government expenses as percentage of GDP. | % | World Bank (2022a). | − |
| Trade openness (open) | Volume of imports plus exports as percentage of GDP. | % | World Bank (2022a). | − |
| Share of immigrant population (im_pop) | Total immigrants as percentage of population in destination country. | % | Eurostat (2022). | ± |
VIF test results for multi-collinearity detection
| Variable | VIF | 1/VIF |
|---|---|---|
| inst_qual | 4.44 | 0.225386 |
| ln(GDPc) | 4.38 | 0.228526 |
| Tax | 2.72 | 0.36749 |
| gov | 2.39 | 0.418921 |
| im_pop | 1.68 | 0.596614 |
| open | 1.47 | 0.679514 |
| refpop | 1.41 | 0.709888 |
| u | 1.38 | 0.723129 |
| Mean VIF | 2.48 |