SHADOW ECONOMY AND TO URISM RECEIPTS: EVIDENCE FROM EUROPE

Service industries like tourism and hospitality, use a good deal of the time of households that never enter into labor input, firm output and price series, or therefore into measures of official GDP. The main factor of flourishing gray economy caused by tourism activity is seasonal and other casual/temporary work. This study aims to test whether shadow economy -tourism model predictions are valid for 30 European countries economies. We used a dynamic panel data estimation method i.e. the general method of moments (GMM). Values for the shadow economy as percent of official GDP variable that is considered to represent shadow economic growth and tourism receipts as a percent of official GDP variable that is considered to represent tourism activities have been obtained from the Schneider (2015) and World Bank Database. The analysis of the annual data between 2003 and 2015 try to suggest that either shadow economic growth Granger -causes tourism receipts, or there is no evidence to suggest that tourism receipts have an impact on shadow economic growth.