Document Type

Article

Publication Date

8-2006

Source Publication

Journal of Development Economics

Abstract

Using the state level data from India, this paper investigates the size of the hidden economy in Indian states over the period 1974/75 to 1995/96. Our analysis has shown that after liberalization of the Indian economy in 1991/92, the growth in the size of the hidden economy has decreased on an average. Our results show that the growth in the size of the hidden economy is approximately 4% less in scheduled election years than in all other years. We also demonstrate that the growth is significantly lower in those states where the coalition government is in power. An increased growth of newspapers and the literacy rates translate to cleaner governance, e.g. to fewer amounts of shadow economy activities in the economy.

Comments

This is the accepted, peer-reviewed, corrected version before publisher formatting.

Journal of Development Economics, Volume 80, No. 2 (August 2006), DOI: 10.1016/j.jdeveco.2005.02.011.

Sumana Chattopadhyay was affiliated with the University of Missouri at the time of publication.