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The role of refugees in the underground economy of the European Union

Mihai Mutascu
Mihai Mutascu
 y 
Scott W. Hegerty
Scott W. Hegerty
   | 13 mar 2022
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Publicado en línea: 13 mar 2022
Páginas: -
Aceptado: 11 feb 2022
DOI: https://doi.org/10.2478/izajodm-2022-0002
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© 2022 Mihai Mutascu et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Figure 1

Refugee population in the EU from 1990 to 2017.Source: Performed based on World Bank (2022a). EU, European Union.
Refugee population in the EU from 1990 to 2017.Source: Performed based on World Bank (2022a). EU, European Union.

Figure 2

The threshold effect of the share of refugee population on the size of the underground economy in the EU countries (full variables).
The threshold effect of the share of refugee population on the size of the underground economy in the EU countries (full variables).

Figure A1

LR statistic of a single threshold model.Notes: The dashed line shows the critical value at the 95% confidence level. LR, likelihood ratio.
LR statistic of a single threshold model.Notes: The dashed line shows the critical value at the 95% confidence level. LR, likelihood ratio.

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
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