Does corruption contribute to the rise of the shadow economy? Empirical evidence from Uganda

This paper investigates whether corruption has contributed to the rise of shadow economy in Uganda. Using autoregressive distributed lag bounds testing approach and granger causality econometric methods we find a positive relationship between size both long- short-run. Additionally, results reveal bidirectional causal corruption, vice versa. These findings suggest that, for case Uganda, an increase contributes versa, all else equal. Given complementary economy, addressing widespread informality country would require; first, reforming political system tackle go after politicians who use their influence power circumvent institutions. Second, carrying out institutional reforms address patronage peddling long way into systemic which turn could help mitigate spread informal sector activities. Third, strengthening enforcement existing laws identify punish culpable public officials offices private gain also level country.