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Economic liberalization in Egypt: A way to reduce the shadow economy?
Institution:1. Philipps-Universität Marburg, Center for Near and Middle Eastern Studies (CNMS), School of Business and Economics, Economics of the Middle East Research Group, Deutschhausstr. 12, 35032 Marburg, Germany;2. CESifo, Munich, Germany;3. ERF, Cairo, Egypt;1. CeRP-Collegio Carlo Alberto and Ufficio Studi Compagnia, San Paolo, Italy;2. University of Turin, Dep. of Economics and Statistics, Turin, Italy;3. University of Insubria, Dep. of Economics, Varese, Italy;4. ISER University of Essex, United Kingdom, CeRP-Collegio Carlo Alberto, Turin, Italy and Dondena-University Bocconi, Milan, Italy;1. 805, Hilife Magnifique, Varthur Panathur Road, Balagere, Bangalore 560087, India;2. Xavier School of Management (XLRI), CH Area (East), Jamshedpur 831001, India;1. Université Paris-Est, IRG (EA 2354), UPEC, UPEM, Pôle du Bois de l''Étang, 5 Bd Descartes, Bureau C241A, F-77454 Marne-la-Vallée, France;2. EM Normandie Business School, Métis Lab, Paris, France;3. Institut de Recherche en Gestion (EA 2354), Université Paris Est, Créteil, France;4. College of Business Administration, King Saud University, Saudi Arabia;1. Department of Economics, University Cantabria, Avenue Los Castros, s/n, Santander CP 39005, Spain;2. Department of Management and Economics, University Beira Interior, Covilhã, Portugal
Abstract:This study examines the relationship between economic liberalization and the size of the shadow economy in Egypt. We use annual data from 1976 to 2013 and show that economic liberalization policies in Egypt have a statistically significant decreasing effect on the size of the shadow economy as a percent of Gross Domestic Product (GDP). This effect is confirmed for both short- and long-term oriented economic liberalization policies. Based on our results, policies which promote trade and economic liberalization can reduce the extension of the shadow economy in Egypt. Therefore, we suggest conditioning international development assistance to Egypt on demonstrable policy actions with respect to economic liberalization.
Keywords:Shadow economy  Economic liberalization  Time-series analysis  Arab Spring  Egypt
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