Shadow economic activity can have detrimental effects on many aspects of a society including trust in government policies, quality of public institutions, government revenues, and economic growth. Empirical studies have generally employed a rational actor approach and focused on economic factors. Most studies in this literature claim that when individuals do not receive the right economic stimuli from the government, it damages the relationship between individuals and the state and citizens opt to move into the shadow economy. A small but growing body of research, however, suggests that certain political factors can also lead to shadow economic activity because of a breakdown in the relationship between individuals and the state. Building on this growing body of research, this study investigates how governments' repression of human rights can play an important role in the growth of shadow economic activities. The empirical literature on human rights offer three main groups of human rights: Survival Rights (physical integrity), Women's Economic Rights, and Civil Liberties (i.e. freedom of speech). This study expects a similar pattern for all sectors of human rights, that when they are abused, citizens will react to those abuses by moving into the shadow economy because of the breakdown in the citizen-state relationship. Several multiple regression analyses are conducted for 150 countries from the years 1999 to 2011 to investigate if these different types of human rights had an impact on the levels of shadow economic activity. Results indicate that while Survival Rights and Women's Economic Rights have no statistically significant impact on the size of the shadow economy, the respect or abuse of citizens' Civil Liberties are statistically significant after the introduction of control variables. A possible reason for the difference in these findings might be that while the fear of reprisal of Survival Rights can work to deter shadow economic activity, repression of Civil Liberties may not create enough fear to deter it. Future research is necessary in this area to expand our knowledge on the political determinants of the size of the shadow economy as well as the creation of policies to combat its growth.
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Master of Arts (M.A.)
College of Sciences
School of Politics, Security, and International Affairs
Length of Campus-only Access
Masters Thesis (Open Access)
Gahagan, Christopher, "Government Respect for Human Rights and their Relation to Shadow Economic Activity" (2019). Electronic Theses and Dissertations, 2004-2019. 6348.