Authors: Grygorii Polonskyi
Kyiv School of Economics
The issues of corruption and shadow economy are of great interest for researchers and policy makers. This thesis aims to investigate the relationship between these two phenomena on the data from Ukraine and Russia. The data on 66 Ukrainian and Russian regions is taken and various estimation approaches are employed (2SLS, GMM and 3SLS). In order to mitigate potential endogeneity of shadow economy and corruption, a set of instrumental variables are used for each. Although previous studies suggest complementary relation for these countries, we found no evidence of such a relation.
Keywords: Corruption, Shadow Economy