Can e-government limit the scope of the informal economy?

The study explores the potential association between e-government and the informal economy. We find that e-government is a powerful instrument to lessen informal economic activities, which is robust to different estimation techniques, subsamples of developing countries, and a wide array of controls and alternative measures. The long-run effect of e-government on lessening informal production is substantially higher than the short-run effect. The strength of e-government appears to be in its entirety, although we find evidence of more influence driven by the development of telecommunications infrastructure. Interaction models show that e-government reinforces the effect of various factors on informal economy reduction. Panel Granger causality tests indicate that causality between e-government and shadow economy is bidirectional. (c) 2020 Elsevier Ltd. All rights reserved.