Using various methods (currency demand, physical input (electricity) method, model approach), which are discussed and criticized, estimates of the size of the shadow economy in 76 developing, transition and OECD-countries are presented. The average size of a shadow economy varies from 12 percent...

Using the MIMIC method, this paper is a first attempt to estimate the size of the shadow economy of 158 countries over the period 1991 up to 2015. In addition to performing a variety of robustness tests, this paper explicitly addresses endogeneity concerns to the use of GDP as cause and...

The paper analyzes the relation between institutional quality, such as corruption, in a country and its monetary regime. It is shown that a credibly fixed exchange rate to a low inflation country, like a currency board, can reduce corruption and improve the fiscal system. A monetary union,...

Performance-based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries. However, hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms. We attempt...

Many countries, especially developing ones, follow procyclical fiscal policies, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for...

On November 8, 2016, the Indian government made a surprise announcement that certain currency notes (representing 86% of the currency then in circulation) would no longer be legal tender (although they could be deposited in banks over a limited period). The stated reason for this sudden...

Who gets elected to political office? The negative selection hypothesis posits that the inherently dishonest run for office, expecting to earn political rent. Alternatively, the positive selection hypothesis suggests that individuals join politics to make a difference. Developing country...

How to fight petty day-to-day corruption is a question often debated by politicians, by the public and in the economic literature. Early studies have noted that a simple and well-known way to fight day-to-day corruption is to create competition among corrupt officials. This paper shows that even...

In this paper, I empirically investigate the presence of spillover effects resulting from the strengthening of law enforcement against corruption and organized crime in local governments. Specifically, I take advantage of an Italian law that gives power to the central government to replace...